Fraction of families take up tax-free childcare scheme

By Gabriella Jozwiak

| 18 February 2019

Early years sector representatives have slammed the government's running of its tax-free childcare offer, after data shows take-up rates are just a fifth of predicted levels.

Only a fifth of families predicted to apply to join the government's tax-free childcare scheme have taken advantage of the offer. Picture: Adobe Stock

Many families are not taking advantage of the scheme, despite potential savings of thousands of pounds a year, according to data released by the HM Revenue and Customs (HMRC).

Commentators say that less well-off families regard making a claim to be not "worth the hassle", both because they claim the benefits favour wealthier families, and because of difficulties signing up.

The initiative offers working parents the chance to claim back 20 per cent of the money they spend on childcare, up to a cap of £2,000 a year.

In December last year, only 91,000 scheme accounts were used by parents - far below the 415,000 the Treasury had budgeted for by October 2017.

Parents are increasingly facing high childcare costs, with the Trades Union Congress reporting in September 2018 that fees have risen by more than 50 per cent in the last decade, while wages are up by less than 20 per cent.

Early Years Alliance (formerly the Pre-school Learning Alliance) chief executive Neil Leitch, said the latest results demonstrated "just how poorly this policy has been rolled out".

"Ongoing technical issues have meant that many parents still struggle to complete the simplest of tasks, even just signing up for the scheme, or reconfirming their eligibility," said Leitch.

"And of course, the regressive nature of this policy - as those who can afford to put the most into their childcare accounts get the greatest support from government - means that for many families on lower incomes, it simply isn't worth the hassle.

"With the government spending much less than budgeted on this flawed initiative, there is simply no excuse for ministers not to use this money to better support parents and early years providers.

"This means not only investing into the IT systems needed to ensure tax-free childcare functions as it should, but also ensuring that the funding going to frontline early years providers is enough to enable them to provide quality, accessible and affordable care and education, both now and in the long term."

National Day Nurseries Association (NDNA) chief executive Purnima Tanuku also criticised the government's efforts to publicise the scheme.

"The government has not advertised this scheme widely, instead relying on organisations such as NDNA to get the word out via childcare providers," she said.

"This has resulted in an underspend of hundreds of millions of pounds a year and a further £600m being returned to the Treasury.

"Given the funding shortfall for childcare places, the sector needs this investment to remain sustainable and to make childcare fees more affordable for parents of younger children who aren't yet eligible for the funded entitlement."

The scheme has been beset by difficulties since it was first launched in April 2017, as the HMRC-run Childcare Choices website, through which parents can set up and manage an account, was marred by technical difficulties.

The department provided data to a department provided data to a Treasury select committee inquiry into childcare that showed between 21 April 2017 and 6 August 2017, a period of 107 days, the website was down for 160 hours.

By October of that year, parents had opened only 30,000 accounts, leading the Office for Budget Responsibility to revise down its forecast for spending on tax-free childcare by 90 per cent, from £800m in 2017/18, to £37m.

As a result, roll-out of the scheme to include children up to the age of 12 was delayed until February 2018.

In March last year the Treasury select committee also urged the government to improve awareness of the scheme, saying low take-up was due to its "failure to publicise the scheme properly".

In the following November, the Labour Party claimed the government would reallocate up to £600m of funding earmarked for childcare on other policy areas outside of the early years sector because of slow take-up of its tax-free childcare scheme.

An HMRC spokesman said the department was running a national communications campaign, including advertising, to raise awareness and encourage more parents to apply for the scheme.

"We're urging all parents to check the Childcare Choices website to see how much they could save, and to apply," added the spokesman.

"More than 250,000 families already have a tax-free childcare account and the number of parents benefitting from tax-free childcare has almost doubled since March last year."

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