Government urged to 're-think' its Tax-Free Childcare scheme as take-up remains low

Katy Morton
Wednesday, February 19, 2020

Less than one in six eligible families are using the Government’s Tax-Free Childcare scheme, reveal new figures.

The Tax-Free Childcare scheme opened in April 2017, but just one in six eligible families are currently using it
The Tax-Free Childcare scheme opened in April 2017, but just one in six eligible families are currently using it

Quarterly statistics published by HMRC today reveal that just 204,950 families were using Tax-Free Childcare (TFC) as of December 2019. HMRC, which manages the scheme, previously estimated that around 1.3 million families would be eligible for TFC.

The figures do however reveal the number of families using TFC has increased since last year when just 91,000 families were benefitting from the scheme.

According to HMRC, account usage was highest in December 2019 among parents with children aged one and two.

The figures also show that while there has been a rise in the number of self-employed parents using the scheme since April 2018, the proportion of total users has fallen. This is despite the self-employed not being entitled to childcare vouchers.

Tax-Free Childcare was launched in April 2017 with a phased roll-out which completed in February 2018. Under the scheme, families can receive 20 per cent top up on childcare costs up to a total of £2,000 per year, per child or £4,000 per year for a disabled child.

The scheme is the only childcare support available to new parents who are not entitled to funded places following the closure of the childcare voucher scheme in October 2018 to new applicants. Parents who claimed childcare vouchers before the system closed still benefit.

Comments

Responding to HMRC’s figures, the Early Years Alliance called on the Government to ‘re-think its childcare policy priorities’.

Chief executive Neil Leitch said, ‘Tax-Free Childcare has been a flawed policy from the very beginning.

‘At its core, it’s completely regressive, as the more money a parent can afford to save towards childcare, the more support they receive from Government.

‘Add to this the seemingly endless technical glitches the scheme has suffered since its inception, and now the the fact that so few families are currently using it, it’s clear the Government needs a complete re-think of its childcare policy priorities.’

He went on to urge the Government to consider how the £600m underspend from Tax-Free Childcare, due to the amount budgeted by the Treasury in 2018 for the scheme far exceeding its actual cost because of lower than predicted take-up, could be better spent rather than it being returned to the Treasury.

‘At a time when the so-called “free” childcare offers are crying out for increased funding, it beggars belief that the Government is continuing to plough money into a scheme that is reporting continually low levels of take-up, and that offers minimal benefit to the families that need the most support.

‘We urge the Government to undertake an urgent review of this policy.’

  • The statistics are available here

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