The move is a blow to childcare voucher companies, as the current voucher schemes will be phased out and closed to new entrants when TFC is introduced.
The Government has chosen the NS&I to manage the Tax-Free Childcare scheme when it is introduced in autumn 2015.
The Government had initially planned for NS&I to deliver the Tax-Free Childcare accounts, but a legal challenge from childcare voucher companies led the Treasury to launch a five-week consultation on its delivery in May.
TFC will provide support of up to £2,000 a year for each child for households where parents earn up to £150,000 a year each and a minimum of £50 a week.
The decision follows two consultations by the Treasury into Tax-Free Childcare accounts last year and in May this year.
The consultations looked into several different methods of delivery of the accounts, including using NS&I, HM Revenue and Customs or private schemes, which the Government said were also ‘viable options’.
In its response to the consultation, the Treasury said ‘The Government’s decision is that the NS&I will be the scheme’s account provider.
‘The Government considered that the NS&I option had real and particular advantages in terms of simplicity for parents and childcare providers, offering security for parents through a trusted brand with all funds guaranteed by the Government, and speed of delivery.’
It comes after a survey by the Childcare Voucher Providers Association (CVPA) revealed that two-thirds of childcare providers have no faith in a Government body delivering Tax-Free Childcare.
A further two-thirds of providers said they would prefer the scheme to be run by a private operator, while more than half thought there would be an increased risk of payment failure if Tax-Free Childcare is delivered through a single operator.
Commenting on the outcome of the consultations, the CVPA argued that the Government had failed to fully consider the needs of parents and childcare providers in choosing a sole public provider that has no experience of delivering childcare support to run the Tax-Free Childcare accounts.
A spokesperson for the CVPA said, ‘This is a hugely disappointing and worrying decision for parents, childcare providers and anyone concerned about ensuring value for money for the taxpayer. It also raises questions about the Government’s commitment to maintaining transparency in its procurement practices.
‘It is immensely concerning that Government is willing to put political expediency above the needs of hard-pressed working parents who are looking to the Government to provide much needed support for their childcare costs.’
The association added, ‘We are also very concerned that the Government’s response goes directly against the stated aims in the Coalition Agreement of promoting small business procurement. At a time when the economic recovery is potentially fragile, this will be another blow to small businesses who are struggling to survive.’