Theresa May has made the support of ordinary working families the foundation of her domestic policy agenda, and for good reason.

Ordinary working families form the bedrock of the United Kingdom, they are the engine of our economy, the glue that holds our society together and an increasingly important part of the electorate. Supporting these families ensures that they are able to live fulfilled lives, and actively contribute to and participate in society.

When ordinary working families thrive, all of society thrives.

Much attention has been drawn to the ’47 boundary’, the age where support shifts between the UK’s two biggest political parties. Working parents encompass a large proportion of the population below this age and for these parents, arranging suitable childcare is their number one priority. It must be available before they can consider doing anything else.

But we’re at risk of taking a retrograde step. The legacy coalition Government’s plans to close Childcare Vouchers to new entrants are still in motion despite the recently announced delay the scheme’s closure for six months, to 4 October 2018.

There’s a huge opportunity to keep Childcare Vouchers open and use this moment to create a comprehensive childcare support package that will benefit British society as a whole.

780,000 parents are currently supported by Childcare Vouchers.

Panel 1

Childcare Vouchers and Tax-Free Childcare, side by side – the boldest childcare support policy ever delivered by a UK Government

The Government’s current plan is to introduce Tax-Free Childcare as a replacement to Childcare Vouchers, but doing so could have disastrous affects as they actually serve different parts of the population.

Tax-Free Childcare is better for the self-employed and those that can already afford to spend large amounts on childcare. A family would have to spend £8,000 of their own money to get the headline £2,000 of support from Tax-Free Childcare.

This contrasts with the Government’s average family spend on childcare of £3,796 each year. This family would only receive £759.20 of support. Lower than the £933 that would be offered to a single parent, basic rate tax payer using Childcare Vouchers.

However Childcare Vouchers offer a number of benefits that will be lost altogether if the scheme was closed.

  • Childcare Vouchers is based on earnings, with lower rate tax payers able to claim more than higher rate tax payers.
  • Childcare Vouchers support families where one parent stops working to look after an elderly relative. These families would lose all support with Tax-Free Childcare alone.
  • Childcare Vouchers also provides support for Children between 12 and 16 while Tax-Free Childcare ends at 12.
  • Childcare Vouchers are a private sector-led solution, removing the administrative burden from Government and involving the employer.

Rather than replacing one system with another and creating a large population of losers in the process, we could combine the two.

We’d retain the private sector-run, targeted solution offered by Childcare Vouchers and incorporate it with Tax-Free Childcare that provides support to those unable to access Childcare Vouchers.

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Employers matter

Financial support helps but employers that have supportive practices and flexibility for parental responsibilities play an essential role in enabling parents to continue to work.

Childcare Vouchers are often the vehicle that fosters the engagement between employers and employees on the pressures of combining childcare and work. It is off the back of this that many workplace practices have been formed – such as flexible hours, opportunities to work from home, and onsite crèches – that allow parents to continue to work productively.

The impact of Childcare Vouchers administered via employers is huge:

  • Well over 20 million of the 31 million UK employees have employers that offer Childcare Vouchers.
  • Every large employer, every public sector organisation, every Government department, and the majority of medium sized companies offer access to Childcare Vouchers.
  • Hundreds of small and medium sized companies register to be able to offer Childcare Voucher schemes every month.
  • Over 780,000 employees are currently supported by Childcare Vouchers and it has helped millions to date.
Panel 3

Avoiding the brewing storm

This isn’t just about seizing the opportunity, but about preventing the impending crisis if we don’t.

The Department for Education’s figures show that Tax-Free Childcare operating alone would result in reverse-redistribution.

A world with Tax-Free Childcare and without Childcare Vouchers would give the average family in London three times as much support as those in the North East – £905 vs £312 per year.

A petition on the Government petitions website to keep Childcare Vouchers open received over 119,000 signatures from parents, employers and childcare providers, and was debated in Parliament in January 2018.

There continues to be concerning headlines regarding the Childcare Choices website, through which Tax-Free Childcare is run. A quick search of #taxfreechildcare on Twitter will show the strength of animosity around the issue. And this is the case with only a minority of parents registered.

Childcare Tax Tweets Final

Previous legacy plans intended to close Childcare Vouchers to all new entrants and any parent changing employer in April 2018. However, following the UK wide campaign to keep the scheme open alongside Tax-Free Childcare, the Government announced a six-month extension to the scheme on 13 March 2018.

As a result of concerns raised across the House of Commons about the April closure of Childcare Vouchers, the Government agreed to keep the scheme open to address issues raised in the debate.

The announcement was widely well-received and poses a unique opportunity to implement a new approach; securing the long-term future of Childcare Vouchers to ensure it can be used alongside Tax-Free Childcare as part of a comprehensive and flexible pack of childcare support for all working families.

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The financial conundrum

The Government clearly does not have unlimited funds and it should balance expenditure and tax receipts responsibly.

When devising Tax-Fee Childcare, the Coalition GCovernment had not considered the broader benefits to the Government and to the economy through supporting parents into the workplace and helping them to stay there.

A report published by the Joseph Rowntree Foundation in December 2014 explored the gains to the Government and to local economies of reducing worklessness and low pay.

Every time an out-of-work claimant gets into work the Government saves almost £6,900 per annum, with the local economy benefiting by more than £14,000 per annum.

Every time someone moves into work, they increase UK Plc’s economic output by more than £13,000.

– Joseph Rowntree Foundation

The benefits to Government do not just come from increased taxation, but reduced expenditure on out-of-work benefits.

It is quite clear that the more we can do to help parents stay in work, the more we all benefit.

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Let’s make this happen!

Implementing a policy like this would usually require lots of new legislation, however, we find ourselves at a unique juncture because Tax-Free Childcare is currently running alongside Childcare Vouchers at this very moment.

The Government has been gifted an opportunity to deliver a bold, positive, headline-grabbing policy without having to run the parliamentary gauntlet.

This would be a policy that actively offers the choice of the best childcare support to every parent depending on their situation. The retention of Childcare Vouchers means this policy is a private sector-led solution that removes the administrative burden from Government.

We think this is an issue of central importance to the electorate and one that Government should set out to address.

We would very much welcome contributions from businesses, parents, academics, parliamentarians and the Government to implement the future of childcare support. Please get in touch via our contacts page if you would like to contribute or arrange a meeting.