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Mugging for the middle classes; Free childcare for poor could cost better-off families [pounds sterling]2,000 a year.

Article Excerpt
Byline: Kirsty Walker Political Correspondent

GORDON Brown was accused yesterday of 'mugging' the middle classes by increasing free childcare for the poor at the expense of better-off families.

The Prime Minister announced that about 250,000 two-year-olds from 'modest or middle incomes' will receive ten hours of free childcare a week in five years.

But he risked undermining his pledge to stand up for the 'squeezed' middle classes by axing tax relief for workers given help with childcare care costs through the Employer Supported Childcare scheme.

A two-parent family on the basic tax rate, where both parents claim the tax relief, could lose up to [pounds sterling]1,924 a year. Those on higher rate with incomes over [pounds sterling]43,000 could lose out by [pounds sterling]2,390.

In return, poorer working parents will benefit by gaining free access to 3,000 children's centres such as SureStart or the ability to claim for places in quality private nurseries.

Experts said that up to a third of all two-year-olds could benefit from the extension to free childcare.

Aides of the Prime Minister said that a third of the tax relief - about [pounds sterling]200million - goes to higher-rate taxpayers earning more than [pounds sterling]43,000. But they risked infuriating thousands of senior teachers, nurses or policemen by saying anyone earning more than [pounds sterling]43,000 was not classed as a 'middle-income' earner.

Asked why the Prime Minister was planning to squeeze middle earners, one official said: 'It may come as news to you, but higherrate taxpayers are not on low or middle incomes.' The official refused to define what 'modest or middle incomes' would mean, but he insisted that nobody currently receiving childcare tax relief will lose out.

He added that the scheme would be 'phased out' from 2010/11, when there will be a ban on new entrants.

'It is not fair that around a third of tax relief for childcare goes to the six per cent of parents who pay tax at the higher rate.' The...

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