- · Budget
data reveals spending on the Government’s troubled tax-free
childcare programme will fall by a further £600 million in the
next four years;
- · This
follows a fall of £300 million projected in the Spring, and
previous warnings from the OBR that spending in the first year
was only 5% of their initial forecasts
- · The
under-spend will not be reallocated to other childcare, despite
problems delivering the flagship 30-hours entitlement
Spending on the Government’s troubled tax-free childcare (“TFC”)
policy is projected to be another £600m lower than anticipated,
data from the Office for Budget Responsibility (“OBR”) has
revealed.
The admission was hidden in the detail of the documents published
by the OBR following the Chancellor’s Budget.
The OBR has previously warned that the struggling programme had
helped less than 10% of the families originally predicted,
leaving parents unable to access help with childcare, while it
under-spent by over 95% in its first year.
The decline in funding will reflect the fact that uptake on the
scheme has once again fallen below the government’s projections,
suggesting that parents are not able, or not choosing, to use the
scheme.
Following a Labour pressure at a crunch Commons vote earlier in
the year, the Education Secretary was forced to keep open an
alternative scheme, childcare vouchers, for another six months.
The extension has cost £50 million a year to account for the
increased demand for the service, at a time when demand for
tax-free childcare continues to fall short.
This is particularly embarrassing for the government, who said
that keeping vouchers open “allowed more time for Tax-Free
Childcare to bed in and for families to understand their
entitlement”, while projected spending continues to fall.
It also comes at a time when the government has been criticised
for under-funding its flagship entitlement to 30-hours of free
childcare a week for working parents. The government’s own
analysis recently revealed that the policy is not reaching the
poorest families, poses a serious risk to the financial
sustainability of early years providers, and has left a
significant number of parents paying more for childcare than they
were before accessing the 30 hours.
However, rather than using the under-spend on tax-free childcare
to increase funding, it has simply been returned to the Treasury.
MP, Labour’s Shadow
Secretary of State for Education, said:
“Austerity is clearly not over for hard-pressed families.
“The Budget has completely failed to provide children with the
best possible start in life, and parents will once again be left
without support in accessing the childcare they need.
“The fact that projected spending has fallen by hundreds of
millions of pounds yet again means thousands of parents will not
be getting the support they need with the cost of childcare.
“The next Labour Government will guarantee 30 hours of free
childcare each week for all 2-4 year olds.”
Ends
Notes to Editors
- · The OBR’s Economic
and Fiscal Outlook updated projected spending on tax-free
childcare, with a total reduction of £600 million in the next
four years.
|
£ billion
|
|
|
Outturn
|
Forecast
|
|
Projected spending on TFC
|
2016-17
|
2017-18
|
2018-19
|
2019-20
|
2020-21
|
2021-22
|
2022-23
|
2023-24
|
|
March 2018
|
0.0
|
0.0
|
0.2
|
0.5
|
0.7
|
0.8
|
0.9
|
|
|
October 2018
|
|
0.0
|
0.1
|
0.3
|
0.5
|
0.7
|
0.9
|
1
|
|
Change (£ billion)
|
|
|
-0.1
|
-0.2
|
-0.2
|
0.1
|
0
|
|
Sources:
For March 2018: Office for Budget
Responsibility, Economic and Fiscal Outlook: March
2018, Table 4.23: Welfare spending, p137
http://cdn.obr.uk/EFO-MaRch_2018.pdf
For October 2018: Office for Budget
Responsibility, Economic and Fiscal Outlook: October
2018, Table 4.26, Welfare spending, from
charts and tables, fiscal.
https://obr.uk/efo/economic-fiscal-outlook-october-2018/
- · The total
reduction in projected spending is nearly £1 billion in the last
year
- · This shows a total
reduction of £300 million compared to the forecast published only
months ago in November 2017:
|
£ billion
|
|
Projected spending on TFC
|
Outturn
|
Forecast
|
|
|
2016-17
|
2017-18
|
2018-19
|
2019-20
|
2020-21
|
2021-22
|
2022-23
|
2023-24
|
|
November 2017
|
0.0
|
0.0
|
0.3
|
0.6
|
0.7
|
0.8
|
1.0
|
|
|
October 2018
|
|
0.0
|
0.1
|
0.3
|
0.5
|
0.7
|
0.9
|
1
|
|
Change (£ billion)
|
|
|
-0.2
|
-0.3
|
-0.2
|
0.1
|
0.1
|
|
Source for November 2017: Office for Budget
Responsibility, Economic and Fiscal Outlook: November
2017, table 4.23: Welfare Spending, p153
http://cdn.obr.uk/Nov2017EFOwebversion-2.pdf
- · “Families with
higher incomes were more likely to be using the 30 hours offers,
while those with lower incomes were more likely to be using the
15 hours only offer. Specifically, the majority (58%) of families
earning £45,000 or more and using Government funded hours were
using the 30 hours offer, with the remaining 42 per cent using
the 15 hours offer only. In contract, most families (74%) of
families earning under £20,000 and receiving Government funded
hours were using the 15 hours only offer, while the remaining 26
per cent were also receiving hours through the 30 hours offer.”
Department for Education, Childcare and early years survey of
parents 2017: follow-up survey, research report,
p14 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/739692/Childcare_and_early_years_survey_of_parents_2017-follow-up_survey.pdf
- · The same report
found that nearly one in seven parents were paying more for
childcare since their child began accessing the 30 hours policy,
and half of parents are facing additional charges for extras such
as meals and trips. “The majority of these parents (69%) reported
that, since their child started receiving hours under the 30
hours offer, the amount they were spending each week on their
child’s formal childcare fees had fallen. For 16 per cent, the
amount had stayed about the same, while for 15 per cent, the
amount had risen.” “Half (50%) of parents using the 30 hours
offer said they paid additional charges (such as for lunches,
snacks, special activities and outings) for their child’s formal
childcare in a typical term-time week.” https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/739692/Childcare_and_early_years_survey_of_parents_2017-follow-up_survey.pdf,
p17
- · Just under
two-fifths (39 percent) of providers reported that there had been
a reduction in their profit or surplus due to the extended hours,
while 46 percent reported no impact and 16 percent reported that
their profits had increased.
- · Almost a third (32
percent) of providers reported that delivering the extended
entitlement had crossed a threshold between being in profit or
surplus; just about breaking even’ and being in a loss. These
included positive changes for 2 percent moving into profit (from
breakeven or loss) and 5 percent moving from loss to breakeven
and negative changes for 17 percent moving from profit to
breakeven and 8 percent moving into loss (from breakeven or
profit or surplus).
- · Regression
analysis of the survey data indicated that the difference between
the parent paid fee and the funding rate was the key driver of
the impact on profit or surplus, although it suggested that
changes in occupancy also played an important role.
