Data reveals government underspend of £2.3bn on tax-free childcare
Fiona Simpson
Monday, November 29, 2021
New data reveals a government underspend of £2.37bn on tax-free childcare since the initiative was launched in 2017.
The figures were revealed in answer to a parliamentary question from Tulip Siddiq, Labour’s shadow early years and families minister.
Siddiq asked: “what the (a) forecast and (b) actual expenditure was for the tax-free childcare scheme in the last five financial years to date.”
Simon Clarke, chief secretary to the Treasury, shared figures which show that the government has spent £2.37bn less on tax-free childcare than was originally budgeted for the scheme over the last five financial years.
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Clarke’s response shows that between 2017/18 and 2020/21, the government spent around £630m on the scheme despite £3bn being initially being allocated for the same period.
The response also shows that the original amount forecast for the scheme has been reduced year-on-year - in March 2017 for 2017/21 it was £3bn and by autumn 2017 it fell to £1.62bn.
Siddiq criticised the government for “completely failing to deliver childcare support for working families”.
“This is the fourth year in a row that the government has failed to deliver on its childcare promises to parents. Families deserve better,” she wrote on Twitter.
Tax-free childcare is a scheme open to households where all parents work at least 16 hours a week and earn between £142 a week and £100,000 a year each.
It allows eligible parents to claim back £2,000 a year on childcare costs.
Sector leaders have said it is “no surprise” that the scheme has not reached its spending allocation as it “has long struggled with low take-up”.
Neil Leitch, chief executive of the Early Years Alliance, called on ministers to reinvest the underspend into the sector, saying: “Historic sector underfunding alongside the ongoing impact of the pandemic means that many providers still face an uphill battle to remain in business.
"As such, we are calling on the government to ensure that any unused funding for the tax-free childcare scheme is reallocated back into the sector, so that providers can deliver the quality, affordable and crucially sustainable care and education that children and families need."
Jonathan Broadbery, NDNA’s director of policy and communications, added that the £2.37bn recouped by the Treasury could “make a real difference to providers and children’s experiences”.
However, he said the sector needs a “fundamental reform of the policy or children, families and childcare providers will continue to miss out.”
“We have been highlighting the complexities of the current system, from funded hours to tax-free childcare and other benefit entitlements, which create confusion for parents and extra work for providers. There is a real opportunity to build a simplified system that brings all this support into one, easily managed account so parents can see what they are entitled to and easily pay the childcare provider that is best for them and their children,” Broadbery added.