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Tax-free childcare: 900,000 working poor families will miss out on crucial help with bills

Responding to the Government’s tax-free childcare consultation, Katie Schmuecker, Policy and Research Manager at JRF, said:

“It is encouraging that the government has managed to find new money to assist with the cost of childcare and help ease the burden being carried by families who are finding it hard to make ends meet despite being in work. The cost of childcare has increased 37% over the last five years – twice the rate of inflation.

“But as it stands, the tax-free childcare offer from the Government is to miss out the majority of people who need it most – that is working poor parents. Only £200 million of the money announced will go to low-income parents on Universal Credit, while £720 million will support families higher up the income scale. 

“Of those working parents on Universal Credit, most (around 900,000 out of 1.5 million) would not be eligible for the extra help the government is proposing. Yet research shows reducing the cost of childcare is particularly important for boosting employment rates in low income families. The cost of childcare prevents some parents from working, and others from working more hours, making it hard for them to better their situation.  

“The cost of living is a growing problem for families across Britain, and childcare policy is one area where Government action can make a real difference. The UK currently spends around £7 billion a year on childcare through a patchwork of free entitlements, tax credits and vouchers.  

“Yet childcare remains a key barrier to work for low income families, preventing some of them from reaching a better standard of living and trapping others in poverty. The government should look again at the balance of funding for this policy. Focusing more of the resource on low income working families will ensure it does always pay to work more.”

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