The Government has announced a new tax-free childcare scheme, of up to Â£2,000 tax relief on childcare a year plus Â£50m of funding for disadvantaged three and four-year-olds.
The new childcare package was announced the day before the Budget by the Prime Minister and the Deputy Prime Minster in a drive to help working parents.
The Government also pledged Â£50m of funding so disadvantaged three and four-year-olds benefit from a new early years pupil premium giving better access to extra support such as speech and language therapy.
Prime Minister David Cameron called tax free childcare an 'important part of our long-term economic plan' and said: 'It will help millions of hard-pressed families with their childcare costs and provide financial security for the future.'
Deputy Prime Minister, Nick Clegg added that the initiative will help create a fairer society and said: 'We want to ensure that everyone can get on and succeed.'
The Government claims the tax relief, which kicks in from autumn 2015, will benefit nearly two million families.
Single parent families and self-employed parents can benefit from the scheme but families where only one parent is working won't be able to. Parents earning over Â£300,000 will not be eligible for the scheme. The Government will provide 20 per cent support on childcare costs up to Â£10,000 per year for each child up to the age of 12.
The Government also announced a new early years pupil premium which will enable childcare providers to employ more highly qualified staff so they can give more support to help three and four-year-olds from the most disadvantaged backgrounds.
Anne Longfield, chief executive of 4Children welcomed the Government's announcement and said the additional Budget announcements on house building, cutting fuel bills, and raising the income tax threshold to Â£10,500 'will also provide some relief to struggling families'.
She added: 'Despite this, the budget analysis shows that the poorest fifth will continue to be worse off under the tax and benefit support changes proposed. In the face of soaring living costs, benefit reductions and stagnant wages, the Chancellor's statement did little to alleviate the concerns of the majority of families facing ongoing uncertainty over future finances.'
Dr Hilary Emery, chief executive of the National Children's Bureau criticised the Budget announcements as 'not that of a Government aspiring to make our country the best for children to grow up in'.
She said: 'While NCB welcomes commitments to assist families with the costs of childcare and to extend the pupil premium to early childhood services, we are concerned that the Government is again taking a piecemeal approach, failing to put children at the heart of spending decisions.'
'For childcare to make a difference to the life chances of vulnerable children, it must be good quality. So, it is vital that the early years pupil premium raises the quality of childcare - increasing levels of staff qualifications, securing strong leadership and providing support for children with additional needs.'
Voice, the union for education professionals, which represents nursery staff, queried the Government's motives behind the tax-free childcare allowance.
General Secretary Deborah Lawson voiced cynicism over the timing of the announcement and said it seemed to be 'more about winning the next election than helping families or childcarers'.
She added: 'We want to know how this will address the crisis of low wages and lack of career structure endured by nursery staff.
'We agree with the recent announcement on up-skilling the profession (by raising the entry requirements for entrants to Early Years Educator training courses) but what incentive is there to gain additional qualifications to raise standards if there is no proper salary and career structure for the early years workforce?
'We therefore call on the Government to match this tax free allowance with investment in the early years workforce.'
Neil Carberry, CBI director for employment and skills, believes the new early years pupil premium will help close the gap as 'too many children start school already behind their peers in terms of vocabulary, and have to struggle to catch up.
'The childcare debate is as much about pupil development as it is supporting parents in the labour market, so high-quality solutions like this and an improved tax break for parents will be pivotal.'
â€¢ The online Tax-Free Childcare accounts will be run by HM Revenue & Customs (HMRC), in partnership with National Savings & Investments (NS&I).
â€¢ Parents currently receiving childcare vouchers through Employer-Supported Childcare can continue to benefit from the scheme with their current employer should they wish to do so, but it will be closed to new entrants from autumn 2015. Workplace nurseries will be unaffected.
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