Providers unlikely to see a penny of Tax-free Childcare underspend

Karen Faux
Tuesday, November 13, 2018

New figures based on Labour analysis reveal a £600m underspend on Tax Free Childcare that will head straight back to the Treasury.

Labour claims that figures contained in documents published by the Office for Budget Responsibility (OBR), reveal a £600m underspend on tax-free childcare (TFC) over the next four years.

However, despite ongoing concerns about funding for the 30-hour ‘free’ childcare offer and the sector’s unsustainability, early years providers fear that that they won’t see a penny as the cash heads straight back to the Treasury.

According to Labour analysis of the OBR’s projected spending on TFC, the shortfall is £100m for 2018-19, followed by £200m in both 2019-20 and 2020-21, and a further £100m drop in 2021-22.

Labour says the fall in funding reflects the fact that take-up for the scheme is much lower than the government’s projections, suggesting that parents are not able, or not choosing to, use the scheme.

Low parent take-up
Government figures suggest that while 391,000 parents have opened a TFC account, less than a third – 109,000 parents – have used their account to make a payment to a childcare provider.

This means that just 7 per cent of the 1.5 million families that are eligible have actually used TFC.

In addition, 313,000 TFC accounts have been opened by parents who do not necessarily intend to use the scheme. This is because parents are given the option of opening a TFC account when they enrol for the 30 hours.

Neil Leitch, chief executive of the Alliance, said: “Given that childcare providers across the country have long been crying out for additional funding, the suggestion that government underspend on the tax-free childcare scheme is to be returned to the Treasury rather than used to support a sector in crisis beggars belief.

'Such a decision suggests that pre-schools, nurseries and childminders are being left to struggle not because the government simply doesn’t have the money for additional investment, but rather because it doesn’t believe that there is a true need for it in the childcare sector.’

 Purnima Tanuku OBE, Chief Executive of National Day Nurseries Association (NDNA) said: ‘The Government says it is keen to boost social mobility and surely the best way to do this is to invest in children’s education in their earliest years.

‘This money was earmarked to support families with young children and should be used for this purpose only, not sent back to the Treasury for the Chancellor to give away to other departments.

This £600m could make funded childcare much more viable for providers and unlock more places within nurseries.’

 

 

 

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