A parliamentary inquiry has identified a litany of failings with new government policies aimed at boosting economic productivity by helping parents with childcare costs to get them into work.
MPs on the Treasury Select Committee said levels of funding made available were not enough to cover the cost of packages parents had been promised, while a combination of technical glitches and poor marketing meant take-up rates were just one tenth of the level predicted by HM Revenue and Customs.
The just-published results of their inquiry said that because funding was inadequate to cover the government's flagship offer of up to 30 hours of free childcare a week, some providers were restricting the times that parents could claim their childcare entitlements in a way that was likely to affect families in poorer areas more than better-off counterparts.
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The 30 hours free childcare offer and tax-free childcare policies were announced by the government last summer and had been due to supersede the childcare voucher scheme, which operates on a salary-sacrifice basis. Despite being scheduled to close to new applicants from early next month, a six-month extension was announced earlier in March – a decision described as “no way to manage childcare policy” by the committee.
The introduction of the new regime has also been hampered by technical issues with the government’s Childcare Service website, run by HMRC, prevented parents from registering for the tax-free childcare offer last summer, and which the select committee described as “unacceptable”.
MPs said the government should only launch websites when officials were satisfied that they are fully functioning, and noted that there ought to be one “online portal for applications to all childcare schemes to avoid confusion”, and a simplified range of childcare support to address “complex interactions between schemes”.
Committee chair Nicky Morgan said her cross-party panel of MPs had “heard no evidence” that the new childcare policies would improve the nation’s productivity, and that the Treasury did not appear to know who would gain and who would lose under the new regime.
“More research by the Treasury on whether the cost to the taxpayer of childcare support is outweighed by the economic benefits would be welcome,” she said.
“One possible way to improve productivity is to remove the age restrictions on childcare support for parents entering training or education. Many parents may need to retrain or upskill to return to work after having children. It is therefore short sighted for the government to exclude such parents from receiving such childcare support.
“The government’s 11th hour stay of execution for the childcare voucher scheme is poor management of childcare policy.
“There will be winners and losers of the government’s decision to move towards tax-free childcare. The government should keep the voucher scheme open until it understands the extent to which parents will be made better or worse off as a result of discontinuing the scheme.”
The committee said a government claim that £4.94 per hour was being made available to fund the 30-hours-free offer was disingenuous because it excluded a proportion of the funding held back by local authorities but included money for specific schemes, such as the Early Years Pupil Premium.
Morgan said the jury was still out on the government’s funding maths. “The government’s own figures on how much it provides per hour to fund 30 hours free childcare are often misleading and out of date,” she said. “One estimate suggests that there would be a total sector-wide shortfall of over £157m per year from 2017-18.
“As a result, some childcare providers are altering their services, potentially redistributing resources away from low income parents towards higher income parents,” she said.
“If the government wants to avoid these consequences, it should pay a higher hourly rate to providers that more accurately reflects their current costs.”
In addition to putting more effort into understanding the impact of its changes, the committee called on the government to consider how the Department for Work and Pensions could pay the childcare element of Universal Credit directly to childcare providers, or continue the policy of payment in advance that exists within Working Tax Credits.
The report had observed that there was a “fundamental design flaw” in Universal Credit – the reform to working-age-benefits currently being rolled out – in that parents were required to pay childcare costs up front before seeking reimbursement.
MPs said the issue needed to be rectified urgently as it undermined the objective of supporting the lowest-paid parents into work.
Responding to the report, a government spokesman said the government is spending more than any previous government on childcare, which is set to rise to £6bn per year.
“Through introducing tax-free childcare and delivering 30 hours free childcare, we are helping working families cut thousands of pounds from their childcare bills,” he said.
“The increasing numbers of self-employed parents can now access support, unlike vouchers and it is also fairer to lone parents.”