Work-life balance charity Working Families and the Childcare Voucher Providers Association (CVPA) argue in a new report that some families are set to lose nearly £1,500 a year in financial support if they are required to sign up for the Government’s new Tax Free Childcare scheme - starting this spring - instead of vouchers.
Consequently, the report’s authors are calling on the Government to keep childcare vouchers open alongside Tax Free Childcare, instead of closing the scheme to new entrants in April 2018.
The Government intends for TFC to replace childcare vouchers in the future, although those already using them will be able to continue to do so.
- childcare vouchers are a widely-used benefit that is popular with parents and employers alike
- many lower earners will lose out on money under Tax-Free Childcare, compared to childcare vouchers
- vouchers give a central role to employers, who value the scheme and being able to support the parents who work for them.
- Parents find vouchers easy to access due to the involvement of their employer, and vouchers provide a way for employers to demonstrate their commitment to supporting family-friendly working practices.
The report points out that TFC and vouchers are separate systems with different eligibility criteria, and that while some parents will be better off under TFC, many others would be better off using vouchers to pay for their childcare.
TFC subsidises parents according to how much they spend on childcare ‘with those who spend the most gaining the most’, it says.
The Government has said that parents can receive up to £2,000 worth of support per child, but the report points out that parents would need to be spending £10,000 a year in childcare costs.
Using childcare vouchers, each working parent can salary sacrifice up to £55 a week.
Crunching the numbers, the report says that a two-parent household where both parents are basic rate taxpayers could save up to £1,866 a year with vouchers. In contrast, with TFC, this average family would only receive £403 in support – a loss of £1,463 compared to the support they would likely access using vouchers.
(An equivalent higher-rate taxpaying household would save £1,240 using vouchers.)
Working Families’ chief executive Sarah Jackson, said, ‘Families juggle working and caring in lots of different ways, and we need a childcare support system that offers maximum choice for working parents.
‘On paper, the new Tax-Free Childcare scheme offers up to £2,000 of support a year but the truth is many families are not going to be spending the amount needed to benefit from that level of support.
‘Employees consistently place a premium on employers who understand and support their childcare needs; vouchers are an important mechanism for this discussion to take place.
‘There’s no reason why the creation of the new Tax-Free Childcare scheme has to bring vouchers to an end.’
Jacquie Mills, chair of the CVPA, said, ‘The CVPA welcomes any additional childcare support for families.
‘However the reality is that many families will lose out under Tax-Free Childcare as compared to vouchers.
‘The headline figure of £2,000 looks generous, but many parents will get far less in reality.
‘Families need to check how they’ll fare under Tax-Free Childcare to make an informed decision about whether they would be better off with childcare vouchers.
‘Childcare vouchers are an extremely popular benefit that have helped millions of parents since their introduction over ten years ago.
'We’re calling for childcare vouchers to be kept open alongside the Government’s new scheme. Let families see which scheme they would be better off with, and let them make a choice.’