United for All Ages believes the current system is a mismatch of complex funding and needs a complete overhaul.
‘An online childcare account system would have relatively low start-up costs and the system could deliver the childcare element of working tax credit which is currently flawed,’ she said.
The online account would combine the various sources of childcare funding available to parents, such as the free entitlement to three and four-year-olds, and tax credits and vouchers. This would then enable parents to spend funds with whichever childcare provider they choose. The idea could make childcare more affordable for parents, and more sustainable for providers.
‘It would be a better and fairer way of distributing resources to parents to pay for registered childcare,’ said Ms Burke.
United for All Ages plan on pressuring the Department of Education and the Treasury to agree on a way forward.
In May 2012, United for All Ages called for an Oyster Card style system to be introduced for parents to pay for childcare. The online system is an evolution of that idea, according to Burke.
United for All Ages believes that this would make better use of funding streams and that by increasing the childcare element of the working tax credit to cover up to 80 per cent of childcare costs, the Government could provide more help to low-income parents.
‘Most agree that there is a vast-differential in the way the free entitlement is distributed by local authorities,’ said Ms Burke.
Other options suggested include ring fencing the early years budget within the Direct Schools Grant, or increasing the cap on the tax exemption on employer supported childcare from £55 to £75 per week. ‘But these options really don’t resolve the bigger issue¬: complexity and eligible funding oozing through cracks in the broken system,’ she added.
‘With an online childcare account system it would be easy to recoup unspent money, and savings could be used to increase the childcare element of WTC/Universal Credit to up to 80 per cent of the costs. This would make a real difference to families on the tightest budgets.