Government responds to childcare concerns of MPs and LITRG

In its response the Government states that HMRC is continuing to work closely with LITRG and others to improve GOV.UK guidance and to develop more detailed guidance for parents.

The Government’s responses on key concerns raised by LITRG and the Committee were as follows.

Lack of awareness and perception of costs

The Committee had drawn attention to LITRG’s suggestion that low up-take of Tax-Free Childcare was partly explained by lack of advertising and publicity for the scheme, and noted similar evidence from the National Day Nurseries Association. The Committee had concluded: “The failure to publicise the scheme properly—a cornerstone of the Government’s childcare policy—is regrettable. The Government should now take all necessary measures to improve awareness and take-up of the scheme.”

The Government has responded by saying: “Rollout of TFC was completed in February of this year. Now that the scheme is available to all eligible parents, HMRC has further increased communications, including engagement with stakeholders and the regional, national and trade press, and social media campaigns. HMRC are also planning for a week of intensive activity ahead of the summer holidays to encourage parents to use TFC for childcare in the school holidays and a paid-for marketing campaign in the autumn to support take-up of the offer.” It also highlighted that its Childcare Choices website has had more than 1.9 million unique users.

The childcare services website and inadequate guidance tools

The Committee had noted that LITRG highlighted areas where it considers the guidance provided by the Government to be insufficient. The Committee also quoted extensively LITRG’s view that some key information is missing, and examples provided by the group of oversimplifications and inaccuracies. The Committee concluded: “At present, there are multiple sources of official guidance for different childcare policies. The Low Incomes Tax Reform Group has highlighted factual errors and inaccuracies in this guidance which the Government should correct. Online guidance should be supported by a specialist childcare support helpline that covers all of the major childcare schemes, with advisers who can help individuals with more complex circumstances, explaining to them what their optimum choice of schemes may be.” The Committee also said that applications for all childcare schemes should be made through one single portal, to avoid confusion, and that the Government should ensure that its online childcare calculator can take account of Universal Credit entitlements.

The Government has responded that “HMRC is continuing to work closely with the Low Incomes Tax Reform Group and others to improve the GOV.UK guidance and to develop more detailed guidance for parents to help them choose, and apply for, the government childcare scheme or schemes which best suit their needs. Information on all forms of government childcare support are available via the Childcare Choices website.”

The Government has resisted the Committee’s recommendation that there should be one single portal for all childcare schemes, saying: “Both TFC and 30 hours can be applied for through the same portal, avoiding the need for parents to provide the same information twice. Other forms of government childcare support are targeted at different parent populations or are integrated benefits, which include non-childcare elements. Their inclusion in a single online portal would increase the length and the complexity of the parent application process.” It claims that the childcare calculator “takes account of UC by directing parents to third party benefits calculators so they can see their UC entitlement and identify if they are living in an area where UC has been rolled out. As UC is rolled out to more families, HMRC plans to enable users to input their UC entitlement into the calculator so they can make a direct comparison with other forms of childcare support.”

Difficulties in choosing the right scheme

The Committee noted that LITRG highlighted a number of complex interactions between different policies which the majority of people who pay childcare costs are unlikely to understand. The Committee concluded that: “While the wide range of childcare schemes has provided parents with greater choice and flexibility, the level of complexity has become overwhelming.” It stated that the Government “must set out how it intends to simplify its range of support for childcare costs, and address the complex interactions between different schemes.”

In its response, the Government “recognises that the existing range of support for childcare costs is complex. That is why it is simplifying the system of support available to parents by replacing the childcare voucher scheme and directly contracted childcare with TFC, which is available to many more families, in a wider range of circumstances. The eligibility criteria for TFC has been aligned with that of 30 hours and applications for the two schemes are made via the same portal on the childcare choices website. The UC childcare offer will provide support to many households who are below the TFC earnings threshold. If a family is eligible for both UC and TFC, they can use the childcare calculator to determine which offer of support would be most beneficial to them.”

Post-implementation review

Additionally, the Committee noted that the Government has committed to carrying out post-legislative scrutiny of Tax-Free Childcare. It stated that: “This commitment must be adhered to and should occur before the scheme closes to new applicants in October. The Government should therefore consider keeping the childcare voucher scheme open, at least until this information is available.”

In its response the Government states that: “Analysis of the impact of TFC on working parents will need to take place once the scheme has had time to bed in, parental awareness has increased, and families have had more time to understand the support they can receive under the scheme. This is why the government has committed to carry out a post-implementation review of TFC two years after it was implemented.”

This has disappointed the Committee and Committee chair Nicky Morgan has written to Chief Secretary to the Treasury Liz Truss remonstrating. In her letter Morgan states: “The Committee was clear in its recommendation that the Government should not close the childcare voucher scheme without knowing its impact on working parents. By carrying out a post-implementation review of Tax-Free Childcare two years after its commencement, the Government will be ending childcare vouchers - a scheme that has been extremely popular with working families-without seeking to understand what the consequences will be.” Morgan notes that uptake of TFC has been 90 per cent lower than expected and again urges the Government “to reconsider the Committee's recommendation and commit to publishing an analysis of the take-up of Tax-Free Childcare compared to the continued use of childcare vouchers during the first year of the scheme-and the subsequent impact on households-prior to making a decision on whether to discontinue vouchers in October 2018.”

By George Crozier, Head of External Relations.