NS&I and HMRC to administer tax-free childcare scheme

The government has confirmed that National Savings and Investments (NS&I) and HM Revenue and Customs (HMRC) will work together to provide the new tax-free childcare scheme.


Its Tax-free childcare: the government’s response to the consultation on childcare account provision follows the consultation launched in May 2014 on options to deliver the tax-free childcare scheme.

The full range of options that were considered include:

  • A government provider – childcare accounts would be provided by government, either through NS&I using its existing banking infrastructure and service capabilities through its current delivery partner, Atos, or in-house within HMRC.
  • A single provider – the government would tender for a single, private sector provider of childcare vouchers. The contract would be re-tendered periodically.
  • Small, fixed number of contracts – the government would tender a small, fixed number of contracts for entities to become account providers. Those contracts would be re-tendered periodically.
  • Open market – childcare voucher providers would enter into arrangements with HMRC through a framework procurement, so that account fees would be paid by government and not parents. There would be no limits on the number of providers that could enter the marketplace, so it remained the most open of the options.

The government engaged with a range of stakeholders, including working parents, childcare providers, employers and software providers, to determine which of these options to choose.

It conducted a range of further work to develop its understanding of each of the options in the consultation, such as analysing how HMRC might deliver the childcare scheme in-house, the timelines and processes required to run a procurement exercise, and the likely timing to build the various models.

The government also ran a pre-market engagement exercise to develop its understanding of the private sector models for delivering the childcare scheme, which provided helpful evidence about the level of interest and capability in the market.

The consultation response stated: “The government has carefully considered the responses to both consultations and the evidence on all of the options. The government’s decision is that NS&I will be the scheme’s account provider.

“The decision was a relatively finely balanced one, involving weighing each of the elements dealt with above. The government considered that the NS&I option had real and particular advantages in terms of simplicity for parents and childcare providers, offering security for parents through a trusted brand with all funds guaranteed by the government, and speed of delivery.

“However, it was recognised that in relation to each of the factors there were a number of arguments both for and against the various options under consideration, and, in some areas, there was little to choose between some of the options.

“As an overall judgement, ministers considered that the other factors dealt with above, some of which might arguably be said to tend in favour of other options, did not outweigh the advantages of the NS&I option. Accordingly, the conclusion is that the NS&I option is the right option to take forward.”

Iain McMath, managing director of Sodexo Benefits and Reward, added: “The government’s decision to select NS&I to provide the new tax-free childcare scheme is a hugely disappointing and worrying decision for parents, childcare providers and anyone concerned about ensuring value for money for the taxpayer.

“The government has chosen to ignore a survey from the Childcare Voucher Providers Association, which revealed that 64% of the 23,000 parents surveyed believe a choice of private sector providers would be more likely to ensure the scheme operates in a timely, hassle-free manner than if the scheme were run by a single, public-sector provider, such as NS&I.

“Hard-pressed working parents have been looking to the government to provide much needed support for their childcare costs, and this decision goes against their wishes.

“Parents can take comfort in the fact that the current childcare voucher scheme is still available, and will continue to be available up to and beyond the launch of the new scheme.”