The government has increased the cap of its tax-free childcare scheme so that working parents will be able to receive up to £2,000 per child, instead of the £1,200 that was previously proposed.
In its Delivering tax-free childcare: the government’s response to the consultation on design and operation, the government also said it will extend the offer of free nursery care for three- and four-year-olds to 15 hours a week, and will introduce free nursery care for the most disadvantaged two-year-olds.
The new scheme, which is to take effect from autumn 2015, was announced in the 2013 Budget.
In the government’s response, Chancellor George Osborne and Danny Alexander, chief secretary of the Treasury, said: “We have engaged through consultation with a wide range of parents and stakeholders, those who know the childcare system best.
“We will deliver a smooth and simple user experience, with a single point of contact for parents to register for the scheme, make payments into their account, and arrange payments to their childcare provider.”
There is a very real risk that the government’s reforms to childcare support for working families will lead to increased complexity and cost, create uncertainty and remove choice.
In turning its back on organisations that are successfully delivering childcare support to working parents across the country, the government is risking the delivery of its tax-free childcare scheme.
We are concerned that parents will lose out on much-needed support promised to them by government, at a time when childcare costs are exceeding annual mortgage repayments for hard-pressed families.
The spiralling cost of childcare is such a huge expense for ordinary families that parents will be grateful of this extra help. It will ease the financial strain that many families find themselves under – despite the improving economic picture.
The scheme will also help make nurseries and childminders more affordable for low-income families on universal credit who will have 85% of their childcare bills paid by the government.
It’s good to see ministers also acknowledging that childcare costs don’t stop once a child starts school. Raising the age limit so the tax allowance can be used by parents until their children begin secondary school will benefit many households. It’s just a pity that parents will have to wait until at least next autumn for help – the overwhelming majority could do with that help right now.
Those working parents who are already using the employer-supported Childcare Voucher scheme, or who join one before Tax-free Childcare is introduced, could well be better off sticking with the vouchers. The Government’s headline figure is a saving of £2,000 with Tax-free Childcare. However, many households with annual childcare costs under £10,000 will receive fewer savings with Tax-free Childcare than they would with Childcare Vouchers. For example, a household with two basic rate taxpayers claiming the maximum allowance of Childcare Vouchers and with monthly childcare costs up to £778 would be better off remaining on a Childcare Voucher scheme. Details of other households which would be better off with childcare vouchers can be found at http://blog.busybeesbenefits.com/2014/03/are-you-better-off-using-childcare.html