Editor’s view - A taxing problem

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A sluggish start for Tax-Free Childcare with a £600m underspend seems to say you can't give money away! What is going wrong?

liz-new

Liz Roberts

What is happening with Tax-Free Childcare? And can it be made to work properly?

The scheme got off to a terrible start, with nightmarish IT problems leading to endless frustration for parents and providers.

Although some of these have been rectified, the system is still prone to tantrums, with the latest glitch meaning that payments were delayed to substantial numbers of providers.

More concerning, however, is the calculation from the Office for Budget Responsibility that government spending on TFC will be £600m lower than projected over the next four years.

Leaving aside the slap in the face for the sector that means this money will go back to the Treasury rather than being spent on our impoverished children's services, this indicates that not many eligible parents are actually getting this help with their childcare costs.

Why is this? Our investigation on pages 10-11 finds that although nearly 400,000 parents have opened a TFC account, only 109,000 have actually used that account to pay a provider.

It is not clear what the reasons are – problems using the system, lack of knowledge that TFC exists, a preference for childcare vouchers (and there was certainly a rush to sign up for these before entry to the scheme closed last month): all could be playing a part.

HMRC has been trying to publicise TFC in various ways, but the cynic might think that government could feel quite pleased with a £600m underspend!

Meanwhile, the voucher companies who have built up a business used by a large proportion of employers are left with a dying model.

TFC can be used by those ineligible for vouchers, of course, such as the self-employed, but the current position tells us that a radical rethink is needed if families are to get the support they need.

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