Only one in six eligible parents use tax-free childcare

Although the number of families benefiting from one of the Government’s main childcare policies has risen in the last year, just one in six eligible families are benefiting from it, according to new figures.

HMRC has published quarterly figures on tax-free childcare uptake. It shows 205,000 families used tax-free childcare for 243,000 children in December 2019. This compares with 91,000 families for 109,000 children in December 2018. However, HMRC has previously estimated that around 1.3 million families are eligible for the scheme.

The figures also show uptake was skewed towards younger children. Account usage was highest in December 2019 amongst children aged one (69,000) and two (61,000). Account usage was considerably lower for children aged five and over (40,000).

Tax-free childcare was launched in April 2017 and allows eligible working parents using a government account to save towards childcare costs to receive a government top-up of £2 for every £8 saved. Critics say the system is too complicated and requires parents to pay fees upfront before they can claim back money. Moreover, those who can afford to pay the most for childcare get the most back.

The new figures come as Home Secretary Priti Patel says some of the skills shortages in the UK could be filled by economically inactive people, including parents who have left the workforce due to a range of reasons, including high childcare costs.

Neil Leitch, chief executive of the Early Years Alliance, said:  “Tax-free childcare has been a flawed policy from the very beginning.

“As its core, it’s completely regressive, as the more money a parent can afford to save towards childcare, the more support they receive from government.

“Add to this the seemingly endless technical glitches the scheme has suffered since its inception, and now the fact that less than one in six eligible families are actually using a tax-free childcare account, and it’s clear that the government needs a complete rethink of its childcare policy priorities.

“At a time when the so-called ‘free’ childcare offers are crying out for increased funding, it beggars belief that the government is continuing to plough money into a scheme that is reporting continually low levels of take-up, and that offers minimal benefit to the families that need the most support.

“As such, we urge the government to undertake an urgent review of this policy, and seriously consider whether this is money that would be better spent elsewhere.”

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