The options outlined in the paper are as follows:

(1) Tax relief of up to £2,000 per family unit at the standard rate of tax for expenditure on childcare for children aged five and under in registered childcare facilities for families where both parents are working outside the home and for single/widowed parents in employment.

Cost: £18 million. This option would facilitate women with children in returning and staying in work, but would be of no benefit to those people whose income is below the income tax threshold or subject to marginal relief. It would be of no value to couples where one parent stays at home. "It would leave the Government open to the charge that it is only willing to assist towards the cost of childminding on condition that parents do not look after their own children."

(2) A tax allowance of £2,000 per family at the standard rate of tax in respect of childcare costs for all families where both spouses work or one parents families where that parent works.

Cost: £36 million if applied to children under five; £59 million if applied to children under 10. This might be fairer than option one in that it does not insist on white economy childcare and would not discriminate against those unable to afford registered childcare.

(3) A tax allowance of £2,000 at the standard rate for spouses who stay at home to look after children.

Cost: Up to £30 million if applied to children up to five years; £49 million if applied to children up to 10 years. These would recognise work done by spouses in the home though it could be argued that the doubling of tax allowances for married couples generally already supports women in the home. Also, child benefit provides direct support in an arguably fairer way. Thirdly, it would encourage the spouse who stays at home, usually the woman, to break the link with employment completely while caring for children. It would also "provoke a very hostile reaction" from the estimated 157,000 families where both parents are working.

(4) Combines option 1 with option 3 and give a tax allowance for all families with either a stay at home spouse or using white economy child care.

Cost: £48 million if limited to children up to five; £79 million if extended to cover all children under 10. "The most serious problem with this proposal is that it would be likely to meet serious protests from those who would not qualify for either reliefs," according to the paper. This would include situations where care is provided by family or friends, or where the family avails of other informal arrangements.

(5) Combines option 2 with option 3 and gives a family tax allowance benefit of £2,000 at the standard rate of tax for all families.

Cost: £66 million for children up to five years; £108 million if up to ten. This has the advantage of being equitable to all families but could cost up to £168 million if it were paid in respect of children up to 16 - 18 if they remain in full-time education. "Also, it would favour the better off".

(6) Phasing in a tax allowance over a number of years, beginning with the 1999 Budget, in order to get the process underway and pending the findings of the P2000 group and the house- hold review group study.

The first step could be to introduce a £1,000 family tax allowance for all families, applying to all children up to five years. This would cost £33 million. The group believes this step would not be sustainable in the long term.

(7) Put additional resources into child benefit as an interim measure.

This would particularly benefit less well off families, including those living on social welfare. Also it would not impact negatively on work incentives. "However it would prove very difficult to sell to taxpayers that even a very large increase in child benefit would be acceptable instead of tax relief on child care costs or a family allowance. The very large increases in child benefit over the last four years costing in excess of £170 million would tend to support this view." Requests for recognition of families in the tax code would probably continue after any increase in child benefit, the group believes.