High earners should have childcare subsidies scrapped to give a boost to low-income families under Universal Credit, the architects of the reforms have said.
The Centre for Social Justice (CSJ) think-tank, in a joint report with Save the Children, argues the Government's flagship welfare reform should fund 100% of childcare payments instead of a maximum of 85%.
This would cost an estimated £300 million but could be funded by lowering income thresholds for free and tax-free childcare, the report published on Thursday said.
The report says: "We do not believe that public money should be distributed to the highest earners while other parents struggle to get on in life.
"The current funding spread for childcare now tilts towards better-off families and funds should be placed where they are most transformative."
The charity and CSJ, chaired by former Work and Pensions Secretary Iain Duncan Smith, also call on the Government to pay childcare bills a month ahead to prevent parents going into arrears.
Currently the upper eligibility for two key childcare provisions - 30 hours free childcare for three to four-year-olds in England and tax-free childcare across the nation - is £100,000 per parent.
But the report argues if this was reduced to £60,000 per person it would produce savings of £158 million, and help fund its fresh suggestion.
CSJ chief executive Andy Cook said: "Every penny invested in universal credit goes straight to those who need it most.
"By increasing the childcare allowance for those on universal credit, those who are currently disincentivised to move into work would no longer face that barrier.
"It is fair that money otherwise going to couples with a joint income of £200,000 should be invested in the country's most disadvantaged."
Steven McIntosh, a Save the Children director, added: "It's simply not right that the highest earners get support for childcare costs, while families on low incomes are struggling to afford childcare.
"By focusing help with childcare bills on those most in need, the Government could make a powerful offer to struggling parents - if you're returning to work on the lowest wages, Universal Credit will cover all your childcare costs."
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