All mothers should be entitled to a weekly payment of £55 to help to cover childcare costs, even if they do not go out to work, a think-tank close to David Cameron has recommended.

The proposals for a flat-rate Parental Care Allowance (PCA) for all mothers with children under three will be considered by Conservative policy chiefs. Policy Exchange said the current system of means-tested subsidies was unfair both to better-off working mothers, who do not qualify, and to mothers who stay at home.

Labour targets childcare subsidies to low-paid working families through the tax credit system.

Policy Exchange said UK parents paid 70 per cent of childcare costs compared with an average 30 per cent elsewhere in the EU. This was despite total spending of £17 billion since 1997.

It was particularly unfair, it said, that most parents (59 per cent) got no help at all, either because the mother stayed at home, or because grandparents and friends helped out.

Of the 41 per cent who used formal childcare, most preferred individual care by a nanny or child minder to the collective day-care of a nursery, Policy Exchange said. Yet subsidies were heavily skewed towards the latter.

The scheme would cost £5.4 billion a year, and be paid for in part by scrapping the childcare element of Working Tax Credit, worth £1.4 billion. Policy Exchange also suggests that benefit for 16 to 18-year-olds should be cut, the Sure Start maternity grant for very low income homes should be scrapped, and that spending on Sure Start children’s centres be scrutinised.

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