The Government should keep childcare vouchers open to parents alongside the new Tax Free Childcare scheme as many lower earners risk losing out on childcare support if not, according to a new report.
The report, “The future of childcare support for working parents”, from Working Families and the Childcare Voucher Providers Association (CVPA), says the Government should keep childcare voucher scheme open to new users instead of closing it to new entrants in April 2018.
It says childcare vouchers are a widely-used benefit that is popular with parents and employers alike; claims many lower earners will lose out on money under the Government’s new Tax-Free Childcare [which comes in this autumn], compared to childcare vouchers; and says vouchers give a central role to employers, who value the scheme and being able to support the parents who work for them. It adds that parents find vouchers easy to access due to the involvement of their employer, and vouchers provide a way for employers to demonstrate their commitment to supporting family-friendly working practices.
Tax-Free Childcare will provide a 20% top-up on childcare spend to families who qualify. Although families can receive up to £2,000 per year, per child, Government figures show that, on average, families will only benefit by £600 a year under Tax-Free Childcare.
Childcare vouchers operate as a salary sacrifice benefit. The amount that parents can save under childcare vouchers is linked to their tax band, with basic rate taxpayers able to save the most. Working Families says a two-parent family where both parents are paying the basic rate of tax can save up to £1,866 a year with vouchers.
Working Families’ Chief Executive Sarah Jackson says: “Families juggle working and caring in lots of different ways, and we need a childcare support system that offers maximum choice for working parents.
“On paper, the new Tax-Free Childcare scheme offers up to £2,000 of support a year, but the truth is many families are not going to be spending the amount needed to benefit from that level of support.
“Employees consistently place a premium on employers who understand and support their childcare needs; vouchers are an important mechanism for this discussion to take place. There’s no reason why the creation of the new Tax-Free Childcare scheme has to bring vouchers to an end.”
Jacquie Mills, Chair of the CVPA, adds: “We’re calling for childcare vouchers to be kept open alongside the government’s new scheme. Let families see which scheme they would be better off with, and let them make a choice.”
However, Ben Black, Director of My Family Care, disagrees. He says: “While childcare vouchers are very good because the money ends up in the hands of working parents – and from there onto the registered providers who give the care working parents need, giving money directly to parents without someone taking a margin in between is clearly a much more sensible idea long term.
“The government’s new plans will stop employers from hiding behind a voucher scheme and pretending to be ‘family-friendly’ by having one in place when there is so much more that can be done.
“However, the new system is incredibly limited. All employees with care commitments should be included – and they should be free to spend the money how they see fit – whether that’s for eldercare, childcare or formal or informal care.”