To the Point - A credit for everyone

The Universal Credit is a good idea and there is widespread political support for the principles that inform its design. But rolling childcare support for nearly half a million families into it is highly problematic. In particular, it will mean that childcare support for lower earners is subject to a savings means-test, so that families with over £16,000 set aside will no longer qualify for help. This is becoming a big issue in the Parliamentary debates on the welfare reform legislation.

A far better reform would be to integrate support for childcare - both the tax credit element and childcare vouchers - into a single, sliding scale system. Currently, the bulk of tax credit support goes to low earners while better-off basic and higher rate taxpayers benefit the most from vouchers. The current system has a U-bend shape of generosity to bottom and top earners, rather than a downward sloping gradient of support that tapers away as families get better off. Ideally, childcare funding should be universal to all families, so that everyone has a stake in the system, but with more help for those who need it. The danger with taking childcare funding into the Universal Credit is that it won't be universal at all: poorer families without savings will benefit, but many in the so-called 'squeezed middle' will lose out.