Employer Supported Childcare
Comments from ACCA
May 2003
ACCA is pleased to comment on the above matter. The response below follows the same order as the consultation document.
Policy Objectives
Many parents find it an extremely difficult choice as to whether to leave their children in the care of others in order to go to work. The significant burden of the costs involved tends to be the final and decisive reason why so many parents give up their jobs and careers and decide to stay at home. Lone parents, in debating whether to return to work, face an even greater dilemma and we agree it is appropriate that they should receive additional assistance through the Tax Credits system.
While the Government has its own social agenda, of trying to help the less well off, in seeking to expand the relief for employer-supported child care the reality is that many skills are lost to the UK economy due to inadequate and expensive child care provision.
We consider that an expansion in employer-supported childcare will encourage individuals to return to work more willingly by affording a greater level of flexibility and employee trust that their children will be secure and well catered for. This is likely to be helped further, for pre-school children, where the child care facilities are based at or close to the place of work.
While we have indicated that we are broadly supportive of the Government's policy objectives, we consider that there should not be a bias, through other potential tax measures, against those parents who make the sacrifice of staying at home to bring up their children. There are too many personal factors involved in this highly emotive area for the Government to seek to push individuals in to embracing a one size fits all policy where going to work and sending the children to a child care "facility" is the norm.
Consultation Questions
a) Extending the work place nurseries exemption will provide businesses with much greater flexibility in deciding whether and how to offer child care which best suits its employees and best fits in with the business and its geographical location. We have long held the view that the exemption is far too restrictive and requires the business to carefully consider how the care is structured and delivered in case it falls outside the rules. The Government should allow the rules to operate with a light touch, as opposed to the prescriptive approach which currently exists, and let businesses decide how they should take advantage of the exemption.
b) We agree that the rules should be aligned for the tax and NIC exemption. However, the exemption itself must be extended if it is to be meaningful and lead to a wide range and size of business taking advantage of it.
c) We agree that the employer should not have to participate in the management of the facility. This has been a significant barrier to employer involvement.
d) Businesses should be left to determine how much they can actually afford. There should not be a prescriptive approach or minimum requirement set for funding. The Government should focus on creating the right environment in which businesses can prosper and employment levels remain high. This is the best inducement for encouraging significant numbers of employers to take advantage of the exemption.
e) While it would seem equitable for the childcare support to be made generally available, it could well mean that businesses, especially smaller ones, are unable to afford to make the provision. Indeed, a selective approach by the employer as to who they will pay for may actually work in favour of those who are lower paid. Perhaps the best way forward would be not to have a general requirement from the outset but to reassess the position once the new exemptions have been operating for a few years.
f) It should be left to the individual business to decide its level of support. An artificial level of £50 per week, should not be imposed. A business is not likely to squander its profits unnecessarily. The operation of such a limit will also create complex record keeping requirements and could be another reason why businesses might decide not to provide child care support.
g) The Government has already indicated its intention to look at widening child care provision by bringing even more carers on to the list of registered carers. We consider it important to consider allowing the exemption to apply to care by grand parents and relations. Such carers are widely used and rarely properly remunerated. While it is tempting for the State to consider carrying on not providing relief for this type of care, purely because such people have always been accepted as unpaid carers, it is quite likely that by allowing such groups within the exemption could mean parents being much more willing to ask grandparents to help in child care. An expansion in such high quality and safe carers could not easily be achieved from the existing pool of carers.
h) We are very much in favour of child care vouchers receiving equal treatment as employer-supported formal care. For many smaller employers it will be the only way that they would be able to consider providing support.
i) The £50 per week per employee idea is over-prescriptive. We have said in answer to an earlier part of the consultation document that such an arbitrary ceiling could be a significant compliance burden and lead to many businesses being put off helping their employees. In any event, in most cases £50 per week, while helpful, would not go very far towards contributing to the total child care cost especially where there was more than one child to pay for.
j) The wording of the question acknowledges that the guidance at present is not adequate nor sufficiently clear. It follows from this that better guidance should be provided in any case. However, a set of simple broad based rules are required, which will make the job of all involved easier and foster greater take up of the exemption.
k) It will be important that, when the new exemption comes in, a campaign to raise awareness is conducted. An advertising campaign along the lines of the PAYE end of year filing would be appropriate for this area. We consider that businesses should be able to contact a dedicated helpline which would specifically deal with this area.
Additional Point for Consideration
Value Added Tax
(VAT)
No consideration has been given to reducing the cost of child care provision by looking at the impact of VAT. We have heard from those who provide the care that the activity being VAT exempt raises the cost base unnecessarily as input tax recovery is not possible. While we appreciate there is an European dimension to adopting any new reduced or zero rates, we would none the less strongly recommend that the Government looks at the possibility of adopting a zero rate for child care provision.