Childcare Contents

2The design of Government’s childcare schemes

Summary of Government childcare schemes and aims

34.The Government runs a number of schemes that reduce the cost of childcare in parallel, some of which can be claimed at the same time as each other, whilst others cannot. The table below sets out a brief description of each scheme and their eligibility criteria.

Table 1: Summary of childcare policies:

Scheme entitlement


Childcare vouchers – Parents can take up to £55 a week of their wages as childcare vouchers, on which they do not pay income tax or National Insurance.

The employer must offer a childcare vouchers scheme.

From 6 April 2018 (extended by a further six months to October in a statement to the House of Commons on 14 March26) childcare voucher schemes will close to new applicants.

Existing recipients will keep their entitlement if they joined a scheme and get their first voucher by 5 April 2018 (extended by a further six months), as long as theystay with the same employer and their employer continues to run the scheme and they do not take an unpaid career break of longer than a year.

Tax-Free Childcare – Up to £500 every 3 months (£2,000 a year) for each child to help with the costs of childcare.

If eligible, the government pays £2 for every £8 a parent pays for childcare provision via an online account.

Parent and their partner (if they have one) must be:

  • In work or getting parental leave, sick leave or annual leave
  • Each earning at least the National Minimum Wage or Living Wage for 16 hours a week

30-hours free childcare (1,140 hours per year) for 3 to 4-year-olds

Parent and their partner (if they have one) must be:

  • In work or getting parental leave, sick leave or annual leave
  • Each earning at least the National Minimum Wage or Living Wage for 16 hours a week
  • Not earning more than £100,000 per year.

15-hours free childcare (570 hours per year) for 3 to 4-year-olds

All children

As part of Universal Credit up to 85 per cent of childcare costs, up to a maximum of £175 per week for one child or £300 per week for two or more children

Parent must be:

  • Eligible for Universal Credit
  • Working

Child Tax Credits

Dependent on number of children and income

As part of Working Tax Credits parents can claim extra amount to help cover the costs of approved childcare, up to 70 per cent of childcare costs up to the same thresholds as for Universal Credit with additional funding for households on housing or council tax benefits.

Parent must

  • Work a certain number of hours a week
  • Get paid for the work they do (or expect to)
  • Have an income below a certain level

15-hours free childcare (570 hours per week) for 2-year-olds

Parent must be entitled to one of the following benefits:

  • Income Support
  • Income-based Jobseeker’s Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA)
  • Universal Credit—if parent and their partner are on a low income from work (this usually means a combined income of less than £15,400 a year after tax)
  • Tax credits and you have an annual income of under £16,190 before tax
  • The guaranteed element of State Pension Credit
  • The Working Tax Credit 4-week run on (the payment a parent receives when they stop qualifying for Working Tax Credit)

Support for parents in education:

1) Weekly payments through Care to Learn

2) Discretionary Learner Support to pay for childcare

3) Childcare Grant to pay for childcare costs for children under 15 or under 17 if they have special needs

1) Under 20 at the start of a publicly-funded course,

2) If a parent is 20 or over and in further education.

3) If a parent is in full-time education

This table is a summary of the policies and not all detail, exemptions and eligibility criteria have been listed. Full details of each scheme can be found at

35.The Committee asked the Chief Secretary to the Treasury, to set out the aims of these schemes. She divided them into three groups. The purpose of the 15 and 30-hours entitlement was:

Child development […] We know that there is an 18-month gap in terms of vocabulary between those on the lowest and highest incomes by age five. Closing down that gap is really important in terms of social mobility and getting better outcomes later on […] When a child is in full-time education it is a driver for parents returning to work, particularly when the youngest child goes into that full-time education.27

36.The purpose of Tax-Free Childcare was to make sure that “middle and higher-income families, up to a maximum income of £100,000, have that bit of extra help in being able to pay for their childcare.”28

37.The purpose of the Universal Credit and Working Tax Credit childcare elements were to “help people on low income into work and to make it affordable for those people to work”.29

38.Further to these aims, the Chief Secretary to the Treasury stated:

First of all, we are trying to have an efficient childcare market, which is getting good value for money, high-quality and affordable for parents. Secondly, we are making sure that we are helping with child development, which we know is very important for the futures of those young children. Finally, we are helping parents into work, particularly focused on the lowest-income parents and how we can help them into work.30

Conflict between policy objectives

39.The Committee received evidence that the stated aims of overall childcare policy was not always clearly articulated, and that individual schemes could sometimes come into conflict. The National Day Nurseries Association (NDNA) summarised the situation as follows:

The emphasis of the Government’s childcare agenda appears to regularly switch back and forth between an emphasis on maximising parental employment and addressing social mobility. NDNA believes this sends conflicting messages to the sector and that both agenda are important and have the potential to complement each other.31

40.The British Association for Early Childhood Education stated that the policies of providing high-quality education for children, on the one hand, and supporting adults to return to work on the other, can come into conflict:

Young children benefit most from frequent short sessions of education while working parents need childcare to fit around working patterns that may include long days and/or irregular hours. Also, the economic drivers around parental working may create pressures to drive down the cost of childcare, whereas the gains to be had from early education (personal, social and economic) have been demonstrated to come from high-quality provision which may cost more up front, but is a sound long term investment across the life course.32

Universal credit, tax credits, and the Government’s policy objectives

41.The Family and Childcare Trust explain how under the Universal Credit childcare element, parents have to pay childcare costs up front, something they did not have to do under Working Tax Credits, that may prevent parents from taking full advantage of the scheme:

Parents looking to start work can find that upfront childcare costs make this difficult or impossible. Childcare providers commonly ask for fees to be in advance as well as asking for a deposit or retainer, but parents are likely to be paid earnings and benefits in arrears, making it hard to manage these upfront costs. [Within] Universal Credit, [there is] no clear pathway for parents to access support to meet upfront childcare costs when they move into paid work. The new Tax-Free Childcare system can help parents to manage this fluctuation as parents can ‘bank’ money in their account during term time and draw on it during the school holidays. Under Universal Credit, however, support is paid in arrears, so parents will not receive any additional support for their costs until after they have been incurred and often also have to have been paid.33

42.The childcare element of Universal Credit plays a crucial role in supporting the lowest-paid parents into work. But requiring parents to pay for their childcare costs up front, before seeking reimbursement later, is a fundamental design flaw that undermines this objective, and should be rectified as a matter of urgency.

43.In particular, the Government should consider how the Department for Work and Pensions could pay the childcare element of Universal Credit directly to childcare providers. Alternatively, it could continue the policy of payment in advance that exists within Working Tax Credits.

Gaps in the Government’s childcare schemes

Access to childcare support while in training

44.Parents in training or education are entitled to certain help with childcare costs. In particular:

45.Parents aged 20 who wish to take on training can only seek support if they are on a further education course and are facing financial hardship, and the childcare costs are a barrier to the parent’s participation in the course.

46.The Committee received evidence from London Councils highlighting certain circumstances where parents are not eligible for Tax-Free Childcare or 30-hours free childcare as a result of taking on training:

The fact that the free entitlement is not open to parents on […] training schemes means that the opportunity of supporting many long-term unemployed parents into work has been missed. Many parents, especially single parents, are unable to undertake the training necessary to acquire a job, or a high-quality job, due to the prohibitive costs of childcare. […] The Government has recognised the importance of training for this group by allowing them to claim benefits while training for a year-long period. However, childcare costs still remain a barrier to enabling parents with young children to undertake this training.34

47.The Family and Childcare Trust also criticised the poor availability of support for parents wishing to undertake education or training:

Reasonably generous provision is available for student parents under the end age of 20, and for full-time university undergraduates, but outside of these groups support is very limited. Students are reliant on the Further Education Discretionary Learner Support Fund and the Advanced Learner Loan Bursary Fund, both of which are locally administered by a college, with no guarantee of eligibility or how much you will get, and usually no possibility of determining whether childcare will be available before applying for a place. […]

The Flexible Support Fund is available through the benefits system and can be used to help with childcare costs in training, but this is very limited. In 2012–13, the scheme spent less than £1.5m on childcare support for people in training35—the equivalent of part-time childcare for a year for just 250 children. Since April 2017, single parents with a youngest child aged three or over have been expected to actively seek work in order to be eligible for benefits. Government have recognised that training can play an important role in the journey into work for this group and they can undertake training for up to a year if this will improve their job prospects. However, they may struggle to find and afford childcare that enables them to undertake this training. Extending the 30 hours provision to parents undertaking training would enable more parents to build their skills and then enter high-quality work.36

48.In a letter to the Committee, the Chief Secretary to the Treasury stated that the Government was considering how its National Retraining Scheme would interact with childcare support:

At Autumn Budget, the Chancellor announced a National Retraining Partnership (NRS), chaired by the Secretary of State for Education, with the CBI and TUC to set the direction of the National Retraining Scheme, and this work is underway. The Government will consider the implications of the NRS on families with caring responsibilities and parents’ role in family life.37

49.The rapidly-changing nature of work makes it ever more important that Government encourages lifelong learning and promotes the acquisition of new skills. As it stands, however, most parents considering entering training or education would be deterred by an absence of proper support for childcare costs. Many parents may need to retrain in order to return to work after having children. Failing to extend childcare to parents who need to take on such retraining is therefore short sighted.

50.As part of its efforts to address the UK’s weak productivity performance through the launch of the National Retraining Scheme, the Government should consider removing age restrictions on childcare support for parents entering training or education. In addition, the Government should expand the courses that qualify for childcare support to include courses that individuals or companies finance themselves, rather than just those which are publicly funded, including those seeking English language training.

Support for those not yet in employment

51.London Councils highlighted circumstances where 30-hours free childcare does not assist parents entering the labour market:

Children who become eligible for the 30-hour entitlement in the middle of term are not funded by the Department for Education (DfE) to start receiving their additional 15-hours until the beginning of the following term. This means that a parent who is offered a job in January cannot get a funded place for their child until the Summer term. Some families will be able to afford to fund their child for the first few months in early years provision, but the parents who are in the most need of free childcare, and are thus dependent on it in order to take on a job, will not be able to plug this gap. It is unlikely that potential employers will agree to wait until the next term before taking on the new employee, especially for lower-paid, lower-skilled jobs.38

52.Entitlement to 30-hours free childcare should begin as soon as a child turns three. There is no justification for delaying entitlement, which unreasonably disadvantages parents of children who happen to have been born early in an academic term.

26 HC Deb, 13 March 2018, col 802

27 Q4

28 Q4

29 Q4

30 Q4

31 National Day Nurseries Association (CHI0095)

32 Early Education (CHI0054)

33 Family and Childcare Trust (CHI0075)

34 London Councils (CHI0093)

35 House of Commons Library, Jobcentre Plus Flexible Support Fund (October 2016)

36 Family and Childcare Trust (CHI0075)

37 HM Treasury (CHI0107)

38 London Councils (CHI0093)

25 March 2018