Government urged to set up online childcare accounts for parents

Speaking at an early years funding conference in London, Denise Burke, director of United for All Ages and the Good Care Guide, said online accounts would reduce the amount of money lost through misallocation of childcare benefits, which could then be reinvested to cut childcare costs.

Burke argued that such an account could collate all the different sources of childcare funding available to parents, such as the free entitlement for three- and four-year-olds, tax credits and childcare vouchers.

Parents could then use their account to pay registered childcare providers directly. Burke claimed that the system had the potential to “make a real difference to families on the tightest budgets”.

“What we have now is a mismatch of complex funding streams, so it’s a no brainer that the system needs an overhaul,” said Burke. “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.

“It’s reported that some £260m gets wrongly distributed through error. It would be easy to recoup any money unspent and savings could be used to increase the childcare element of working tax credit in Universal Credit up to 80 per cent of costs.”

Burke’s suggestions follow an earlier proposal to explore the feasibility of introducing a childcare payment system based on Transport for London’s Oyster travelcard, which she researched with the think-tank Policy Exchange.

“A few years ago I promoted the idea of an Oyster-style card which would hold funding credits and could be used just like a debit card with all registered childcare providers,” said Burke.

“Things have moved on and that original thinking was researched by Policy Exchange, who agreed that there is some mileage in the idea, but that an online childcare account system is the way forward.

“There would be no need to set up a new government infrastructure because the model could piggyback on existing childcare voucher electronic systems.”

A spokesman from the Department for Education did not reject the idea when asked if the government would consider the online account as an option for improving childcare.

“Many parents are concerned about childcare costs,” said the DfE spokesman. “We want to help working families with them, and will make an announcement soon.”

The DfE has said it plans to announce measures on childcare funding in the Budget on 20 March. These measures are expected to include a tax break for working families to help them with childcare costs.