• The government could eradicate the employer national insurance relief costs of the voucher scheme if it changed the terms of the scheme to only allow employee national insurance relief.
• When the Committee asked the Chief Secretary to the Treasury to provide an economic analysis of who will gain and who will lose out from the transition from vouchers to TFC, she was not able to do so. The government has also failed to provide when asked a comparison between the programme and administrative costs of the two schemes. • The government has committed to carrying out post-legislative scrutiny of TFC. This commitment must be adhered to and should occur before the scheme closes to new applicants in October. The government should therefore consider keeping the childcare voucher scheme open, at least until this information is available. • The government has committed to providing more help to working parents with their childcare arrangements. Some families will be worse-off under TFC than they would have been with childcare vouchers. For such families, it will be difficult to reconcile the government’s policy with their own personal experiences. Moreover, it has not been confirmed whether any impact assessments have been conducted to confirm the extent to which low-income households will be affected by the closure of the childcare vouchers scheme. • The government is pleased that the Committee recognises the disadvantages of the childcare vouchers scheme in that it only supports parents whose employers provide such vouchers, does not take account of the number of children in a household, excludes self-employed parents, and favours two-parent households over single-parent households. TFC was designed to address these concerns and a number of options were considered and consulted on as part of the design of TFC. • Most childcare voucher schemes operate under salary sacrifice arrangements. When running a scheme, an employer will incur an administrative cost either directly or through using a voucher provider. These costs are generally offset by the National Insurance contributions (NICs) saving the employer makes. The government does not believe that having different employer and employee NICs is a feasible way forward. Such a treatment would make the scheme significantly more difficult and costly for employers to administer. • The estimated annual operating costs for the childcare service through which parents apply for both TFC and 30 hours currently stands at £35.6million in 2018/19 and £47.5 million in 2019/20. These figures demonstrate that the cost of administering TFC is significantly lower than the estimated foregone employer NICs of £220 million a year. This is money that does not go directly to parents to help pay for their childcare costs. It is not possible to accurately calculate the costs of administering childcare vouchers as these costs are incurred by individual employers and voucher providers, who do not share this information with government. • The government has always been clear that TFC was being introduced to replace childcare vouchers. The decision to phase out childcare vouchers and directly contracted childcare, and replace this support with TFC was made in 2013 and received parliamentary approval through the Childcare Payments Act 2014. To reflect concerns about the timing of the closure of childcare vouchers and the transition to Tax-Free Childcare, the government took the decision to keep childcare vouchers open for a further six months until October. This will allow more time for Tax-Free Childcare to bed in, for awareness to increase and for families to understand the support they can receive under the scheme. • Through TFC all families who are eligible can get support, regardless of who their employer is or whether they are self-employed, and support is based on the number of children in a family rather than the number of parents. TFC is targeted at a similar income population as childcare vouchers but will provide support to nearly 1 million more families compared to the number currently using vouchers. The government published their response to the Committee on 18 May 2018. Specifically around childcare vouchers, responses included:
• Analysis of the impact of TFC on working parents will need to take place once the scheme has had time to bed in, parental awareness has increased, and families have had more time to understand the support they
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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