Childcare underspend of £600m set to be spent outside early years sector, Labour warns

Analysis of data published by the Office for Budget Responsibility (OBR) after last week's budget revealed that projected spend on the scheme over the next four years on tax-free childcare is likely to be £600m less than expected.

In March the government projected that between 2018/19 and 2022/23 it would spend £2.2bn on the scheme, which allows eligible parents of at least one child aged under 12 to claim 20 per cent of their childcare costs from the government, up to an annual limit of £2,000.

But figures published by the OBR show the government has revised down the expected spend for the same period to £1.6bn - £600m less than originally budgeted - in light of fewer parents taking up the offer than expected.

The Labour Party claims this money will not be reallocated to other areas of the early years sector, such as the extended 30 hours childcare entitlement which launched in September 2017, despite repeated warnings that it is underfunded.

Shadow early years minister Tracy Brabin said the government is "chronically underfunding their own policies".

"It is becoming ever clearer that the Tories' flagship offer simply isn't living up the promises they made in the election, and the consequences are being felt by parents across the country," she said.

"Fees are rising, free places come with hidden costs, and too many families aren't eligible for the support they need - while nurseries and other providers are being pushed to the brink of bankruptcy by a system that isn't working."