Nikita Malik: The Budget has created real dilemmas for working mothers

Rachel Reeves’ Budget has taken taxes to an all-time high – and some of the biggest losers of these changes will be working mothers.

Like others, they will be caught in frozen income tax thresholds for an additional three years, meaning less take-home pay to provide for their children. But Reeves’ salary sacrifice tax raid also means it will be harder to take advantage of schemes that help keep incomes below the £100,000 household limit needed to utilise free childcare hours.

This is important because our research at the Centre for Social Justice shows that more choices for working mothers, not less, are imperative in both keeping and returning women to the workforce. Census data from July 2022 (the latest release date) shows how from April to June 2021, approximately 75 per cent of working mothers with dependent children were in work in the UK, reaching its highest level in the equivalent quarter over the last 20 years (66.5 per cent in 2002).

The employment rate was higher for mothers than either women or men without dependent children and has been since 2017. This data was released prior to Government funded childcare hours being introduced, and in fact the latest data from the DfE shows how in 2024, 64 per cent of mothers in families with children aged 0-4 years mentioned that having reliable childcare helped them to work, in line with 66 per cent in 2023.

Working mothers still need better options to satisfy childcare requirements, however.

These can be broken down into three areas.

First, allowing mothers to spend time with their children themselves (either by increasing flexible working options, or, as the CSJ advocates, rebalancing early years support to pay families directly and organising taxation at a household level).

Second, enabling families to choose who it is they want to take care of their children.  We have long called for the Government to develop a childminder-equivalent status for grandparents or other named adults known to parents, with an Age UK poll in 2017 revealing 40 per cent of grandparents over the age of 50 already provide regular childcare for their grandchildren.

And finally, normalising that time taken to take care of one’s children isn’t ‘economic inactivity’, but rather another job in and of itself, that still contributes to the British economy.  To group those who are contributing by raising children with people who are out of work due to long-term sickness or early retirement is misleading and can hinder their return to work.

Without considering and offering more options, the Government finds itself in the peculiar position of enabling those with large families on benefits to stay at home with their children, rather than working families.

Take the abolition of the two-child limit, for example. Our research finds that jobless families on combined benefits will now take home £18,000 more per year than the post-tax wages of a working family. To take home the same amount as a three-child family with combined benefits will now require a salary of roughly £71,000 before tax. These stark differences demonstrate how the incentives to work, or progress within work, have been further eroded.

To make work pay, the Government must tackle the high effective tax rates that result from income tax and Universal Credit tapers.

They can also focus on rebalancing early years support to pay families directly and organise taxation at a household level. This would give mothers viable choices to decide who takes care of their children while they are at work, and when and how they want to return to the workplace.

After all, happy mothers with more choices lead to more stable families.