As part of the spending review, the childcare element of the Working Families tax credit will reduce from 80 per cent to 70 per cent. Parents will also now have to work at least 24 hours a week, rather than 16, to meet the new criteria. Charities also warned that flexible and part-time work opportunities would be lost.
Cutting the maximum that working parents can claim by ten percentage points means that the amount some receive will drop from £240 to £210 a week.
The National Day Nurseries Association said it was concerned about how the cut would impact on low-income families and nursery owners. NDNA chief executive Purnima Tanuku said, 'Parents' ability to work or train is central to the successful recovery of the economy, but reducing the amount of childcare costs will hurt poorest parents the most.
Low-income families can claim the highest proportion of childcare fees and a reduction to only 70 per cent could mean that families cannot balance their finances.'
Some employers may not be able to offer extra hours, so some parents will lose their eligibility for help with childcare costs and working would no longer be an option, she added.
'Nurseries will be very concerned that this move will hit the families who stand to gain the very most from their child being in high-quality childcare. Nurseries could struggle even more, as parents either find work does not pay because of childcare costs, or cut down on their usage by turning to informal care.'
The charity Working Families said the cut would create disincentives for part-time and flexible working when 500,000 public sector jobs were under threat.
Chief executive Sarah Jackson said, 'Reducing funding for childcare costs makes it £30 a week harder for a parent to go back to work. High childcare costs are a significant work disincentive and parents struggle to pay them now. It is difficult to imagine how this supports the Government's promise that work will always pay.
'A single earner on the minimum wage working 16 hours a week will see their family's income reduced to less than the amount they'd get from claiming Jobseekers' Allowance as a couple.
'The Government should be limiting job losses through flexible and part-time work. The first step before making anyone redundant should be to see if changing hours is a real alternative to job losses.'