Thank you for contacting me recently about the Childcare Voucher scheme.
The scheme is due to close to new entrants on 4 October 2018 following a six month extension announced in March. This postponement shows the difference pressure can make – I and many of my colleagues opposed the closure of the scheme and I know many parents, employers and childcare providers added their voice and helped secure the extension.
It is estimated that over two million families have benefitted from childcare vouchers since their introduction in 2005. Over 100,000 people signed the parliamentary petition to keep the scheme open beyond April, which led to a debate in Parliament at the start of this year. All those signatories stated clearly that they are opposed to the closure of the scheme to new applicants and to existing applicants merely because they change jobs.
Depending on a family’s circumstances, they may be better off with childcare vouchers rather than Tax-Free Childcare. In March, the House of Commons Treasury Committee published a report which stated that while childcare vouchers could provide income tax and National Insurance relief worth up to £2,860 per parent, Tax-Free Childcare only provides £2 for every £8, up to a limit of £500 every 3 months (£2,000 per year). The report also identified that with a take-up rate 90 per cent lower than initially expected, Tax-Free Childcare was clearly under-performing. The six month extension was also a recognition of some of the problems with Tax-Free Childcare that have left many parents without access to essential financial support.
More generally, the childcare system is complex and chronically underfunded and it is concerning that the cost of childcare has risen by between 32% and 47% across England since 2010, while wages have only risen by around 16%. I strongly support investment in childcare and believe there should be an extension of 30 hours of free childcare to all two, three and four year olds.
I believe the Government should abandon their plans to phase out childcare vouchers for working parents from October and I can assure you that I will continue to follow any developments closely and bear your views in mind.