The shortfall follows months of technical hitches and delays with the online registration system.
The Office for Budget Responsibility's (OBR) forecast, published this week alongside the Budget, reveals that just 30,000 parents had registered for Tax-Free Childcare (TFC) by October instead of the 415,000 expected.
Due to the 93 per cent fall in expected take-up of the scheme, the OBR's forecast shows there has been a 90 per cent reduction in expenditure allocated to Tax-Free Childcare.
Within its Autumn Budget 2017 policy measures document (pages 239/240), the OBR states, 'We have assumed a slower pace of take-up than we did in March.
'When TFC was originally announced (in Budget 2013), our forecast extended to 2017-18 and TFC was expected to cost £0.8 billion in that year; our latest forecast is £37 million.'
Reasons it suggests for the fall in expected take-up include the launch of TFC being delayed following a legal challenge to deliver the scheme through NS&I, the move to a gradual roll-out, and the decision to push back opening up the scheme to parents of older children.
As of today (Friday 24 November), parents whose youngest child is under six or turns six on this day are able to register for TFC. Before this, only parents of children under the age of four (on 31 August 2017) could benefit from the scheme that went live in April.
Nursery World reported this month that full roll-out of Tax-Free Childcare to working parents of children under the age of 12, or under 17 for disabled children, has been delayed until March 2018.
The move to delay the full roll-out of the scheme appears planned to enable further improvements to be made to the Childcare Service, which has suffered from numerous technical glitches.
Given that childcare vouchers will close to new entrants in April, the Childcare Vouchers Providers Association (CVPA) warns that there is now a real risk that some parents could be without childcare support, and is continuing to call on the Government to keep open the voucher scheme alongside Tax-Free Childcare.
The issue is due to be debated in Parliament after a petition on the subject received more than 100,000 signatures.
Jacquie Mills, chair of the CVPA, said, 'Only 7 per cent of the parents expected to sign up to Tax-Free Childcare by April 2018 will have done so. This is deeply concerning for parents across the country. It’s particularly alarming given the Government plans to close access to Childcare Vouchers in April 2018, which risks hundreds of thousands of parents being left with no childcare support at all.
'The Government is in a position to keep childcare vouchers open alongside Tax-Free Childcare, removing this risk and showing that it recognises the pressures faced by hard working families.'
An HMRC spokesperson said, 'More than 140,000 families have opened Tax-Free Childcare accounts, many of whom are currently taking advantage of 30 hours free childcare. We expect usage of Tax-Free Childcare to continue to rise as we gradually open up the service to more parents. We want to encourage more parents to take up the offer they are entitled to and now the service has improved, we will undertake activity to raise awareness of Tax-Free Childcare amongst parents.'