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Calls for Childcare Voucher scheme to re-open

Emma Lunn
Written By:
Emma Lunn

More than 80 per cent of parents are worse off now the Childcare Voucher scheme has closed, with 9 in 10 blocked from benefitting, according to the Childcare Voucher Providers Association (CVPA).

One year on since the Childcare Voucher scheme closed to new entrants, a survey of 20,000 parents, employers and childcare providers has revealed the negative impact of the scheme’s closure.

The findings have renewed calls across the sector for a change of direction from government to re-open the popular workplace scheme.

The CVPA survey highlights the barriers working parents face when returning to work with fewer options of childcare support. Four in 10 (40 per cent) of respondents said they’re less likely to return to work now Childcare Vouchers have closed, with 84 per cent having to reconsider their future career plans.

The lack of choice and poorer support has also left a staggering 84 per cent of working parents worse off, with nine in 10 families prevented from signing up to the scheme.

According to the CVPA, 98 per cent of current users are happy with their experience with Childcare Vouchers. In comparison, more than 60 per cent of parents who’ve since signed up for Tax-Free Childcare have found the process problematic, unclear and confusing. Only one fifth found the scheme easy to use.

Jacquie Mills, chair of the CVPA, said: “The voices of parents coming through our survey couldn’t be clearer – childcare support has to provide flexibility and choice, allowing parents the opportunity to decide what works best for them.

“It also needs to break down the barriers to career progression, extending opportunities to working parents, and enabling employers to attract the talent they need. Finally, it has to be simple and effective – that’s why we still support reopening the Childcare Voucher scheme. This would be the best option to achieve all these aims, aligning with the government’s objectives to support working families and helping businesses thrive.”

Jane van Zyl, CEO of Working Families, said: “This report confirms that the closure of the Childcare Voucher scheme is bad for employers and bad for parents. The government’s decision to close the scheme was disappointing—not least because in the workplace, vouchers allowed employers to start conversations with parents about their family-friendly working policies and practice more broadly.”

What are Childcare Vouchers?

The childcare voucher scheme allows employees to exchange part of their gross salary for childcare vouchers, meaning a proportion of their salary is tax-free and exempt from National Insurance contributions.

Vouchers are a fixed pounds and pence yearly benefit to employees of participating companies, worth up to £933 per parent (basic rate taxpayer) or £625 per parent (higher rate) up to age 15.

The vouchers can be used to pay for most forms of registered and approved childcare such as nannies, before and after school clubs, childminders and nurseries.

But the government closed the voucher scheme to new applicants in October 2018. Only parents who were already receiving vouchers before this date are still eligible. Parents lose eligibility if they either leave their employer, fail to order vouchers within a 12-month period, or voluntarily switch to tax-free childcare.

What is Tax-free Childcare?

The Tax-free Childcare scheme was introduced in April 2017. Essentially, it gives eligible families 20 per cent off childcare costs. Parents open a centralised account and the government adds 20p for every 80p you pay in. You then pay your childcare provider from that tax-free childcare account.

Tax-free Childcare is paid per child as a proportion of childcare costs, up to £2,000 a year until the child is 11, so the amount of benefit received depends on the amount of childcare used.

Tax-free Childcare tends to work out as better value for families with high childcare costs, those with more than two children, and self-employed parents who cannot access childcare vouchers.