Increase childcare funding for 30 hours, says Treasury Committee report

The Government should increase the amount it pays to childcare providers to provide the 30 hours free care for three and four year olds, according to a Treasury Committee report on childcare.

The report also calls for the childcare voucher scheme to remain open until it is clear who the winners and losers might be from phasing it out for new joiners. The Government has recently announced a six-month delay in the process of phasing it out.

It adds that the Government needs to improve awareness of the Tax-Free Childcare scheme which is meant to replace the voucher scheme and extend tax rebates from childcare costs more widely. The report says take-up is 90% lower than initially projected by HMRC.  The report also calls for improvements in the quality of the Tax-Free Childcare website, which many parents have struggled with. It calls the site “unacceptable” and says the Government should “only launch websites when they are satisfied that they are fully functioning”. It says official childcare advice is sometimes wrong and calls for a one-stop shop portal and a helpline to support parents negotiating the different schemes.

The report calls for an urgent review of the policy of making parents on universal credit pay upfront childcare fees before seeking reimbursement. Under tax credits this was not a requirement. Other recommendations are that the 30 hours be available as soon as children turn three, rather than the term after they turn three and that childcare support for parents under 20 who are in training/retraining should be extended to all parents.

On funding of the 30 hours for three and four year olds the report calls the Government’s statements are “misleading”. The Government has claimed it provides £4.94 per hour to fund 30-hours free childcare when the report says this includes and excludes certain costs and that the real figure is closer to £4.34. The most recent estimate of the average cost per hour of providing childcare is £4.68, says the Committee, suggesting that Government funding does not cover the full cost of free childcare provision. This shortfall has led to some providers restricting times when parents can use the free hours, cutting staff and/or charging for previously free ‘extras’.

Childcare Vouchers

On vouchers it says: “The Government’s 11th hour decision to postpone the discontinuation of the childcare voucher scheme by six months is no way to manage childcare policy. As the Government moves towards Tax-Free Childcare, it must scrutinise the change to understand the extent to which parents will be made better or worse off, and should do so before the six-month extension of the voucher scheme ends in October. The Government should consider keeping the childcare voucher scheme open until this information is available.”

More generally, the report says more research is needed into the effectiveness of the Government’s childcare policies in improving parental employment and productivity.

Nicky Morgan MP, Chair of the Treasury Committee, said: “The Committee has heard no evidence that the Government’s childcare policy will improve the UK’s productivity. More research by the Treasury on whether the cost to the taxpayer of childcare support is outweighed by the economic benefits would be welcome.

“One possible way to improve productivity is to remove the age restrictions on childcare support for parents entering training or education. Many parents may need to retrain or upskill to return to work after having children. It is therefore short sighted for the Government to exclude such parents from receiving such childcare support.

“The Government’s 11th hour stay of execution for the childcare voucher scheme is poor management of childcare policy. There will be winners and losers of the Government’s decision to move towards Tax-Free Childcare. The Government should keep the voucher scheme open until it understands the extent to which parents will be made better or worse off as a result of discontinuing the scheme.

“On funding, the jury is still out. The Government’s own figures on how much it provides per hour to fund 30-hours free childcare are often misleading and out of date. One estimate suggests that there would be a total sector-wide shortfall of over £157 million per year from 2017–18.

“As a result, some childcare providers are altering their services, potentially redistributing resources away from low income parents towards higher income parents. If the Government wants to avoid these consequences, it should pay a higher hourly rate to providers that more accurately reflects their current costs.”

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