Tax-Free Childcare delayed until 2017

Thursday, July 2, 2015

Tax-free childcare (TFC) has been delayed until early 2017, following a legal challenge from the childcare voucher provider companies.

The scheme, which was not able to be developed because of a succession of court cases, had been due to start in the autumn.

Now the Childcare Voucher Providers Association and Edenred have also lost their case against the Government in the Supreme Court.

The companies have previously had their case dismissed in the High Court and Court of Appeal, but appealed on both occasions.

The scheme will be run by a sole operator – National Savings and Investments (NS& I), a non-ministerial Government department, which has an existing outsourcing contract with private firm Atos since 2013. This in effect means that the company will be carrying out the work.

The voucher providers had tried to prove that awarding the contract to run the scheme broke EU procurement law, because a new tender process had not been carried out.

All childcare voucher schemes will be phased out and closed to new entrants when TFC is brought in.

Treasury minister Damian Hinds said, ‘We are pleased that the Government’s proposals for delivering Tax-Free Childcare have been found to be clearly lawful. This Government is absolutely clear on the importance of supporting families with their childcare costs.

‘It is disappointing that some organisations involved in the existing scheme felt the need to take and persist in this costly and wasteful course of action, which has led to a delay in the launch of Tax-Free Childcare.

‘We are now pressing ahead with the scheme as part of our ongoing commitment to support working families.’

Speaking in reaction to the Supreme Court’s judgement, CVPA spokesperson Simon Darby said, ‘Support towards childcare costs is vital for working parents.

‘The Childcare Voucher Providers Association (CVPA) brought about the case in order to ensure fairness in government procurement. The CVPA felt it had legitimate concerns about how the Government decided to deliver its new Tax-free Childcare scheme and the effect this would have on parents trying to access childcare support.

‘The CVPA accepts that these concerns have now been given a fair hearing and remains committed to working with HM Treasury, HMRC and NS&I to ensure the successful implementation of the new Tax-free Childcare scheme for parents.

‘During the transition to Tax-free Childcare, CVPA members will continue to provide support to parents using the current childcare vouchers scheme.

‘Voucher providers are well-positioned to play an active role in raising awareness of the upcoming changes and to ensure that parents have the information they need to get the support they deserve.’

Purnima Tanuku, chief executive at National Day Nurseries Association (NDNA), said, ‘News of a delay in the launch date for the Tax-Free Childcare scheme will be disappointing to parents and nurseries who are keen for families to benefit from more Government help as soon as possible with the cost of childcare.

‘However, we recognise that putting everything in place for this to happen is a complex process that will take time and should not be rushed. It is vital for parents and nurseries that the new system is robust and workable from the outset.’

She added that she hoped that there might now be a radical re-think of the way childcare is funded, in particular NDNA’s suggestion for a single, parent-held account for all childcare funding including childcare tax credits and free nursery hours.

Neil Leitch, chief executive of the Pre-school Learning Alliance, said the delay was ‘a major blow to Government, and many parents will be understandably disappointed by such a significant delay to the roll-out of the scheme. That said, we remain unconvinced that demand-side subsidies are an effective way of tackling rising childcare costs in the long-term.

‘Evidence has shown that it is supply-side funding that is vital not only for lowering costs for parents, but also for supporting providers to deliver high-quality early years provision – a vital aspect of childcare policy that has been largely overlooked in the face of the Government’s 'back-to-work" agenda.’

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