The figures come from a response to a written parliamentary question tabled by Labour’s shadow early years minister Tulip Siddiq, who has accused the Government of serial incompetence in delivering childcare support to working families.
The new data from the Treasury reveals that in the last three financial years there was an underspend of £1.715 bn on tax-free childcare, which Labour said could have supported families with childcare costs if the Government had ensured that the public were aware of the scheme and how to use it.
For 2017-20 the Government forecast expenditure for TFC was £2.1bn for the three years, but actual expenditure was £385m, leaving £1.715 bn in underspend.
The Government's Tax-Free Childcare scheme was launched in April 2017 and allows working parents to claim back £2,000 a year on childcare costs, but take-up of the scheme remains low.
When it was launched both parents and providers faced multiple problems with the IT system set up to administer the scheme.
In response to Ms Siddiq's question about forecast expenditure and actual expenditure for the Tax-Free Childcare scheme in the last three financial years to date, Steve Barclay, chief secretary to the Treasury, said, ‘The forecast expenditure (forecast in March 2017) was £400m in 2017/18, £800m in 2018/19 and £900m in 2019/20. The actual expenditure was £32m in 2017/18, £117m in 2018/19 and £236m in 2019/20.’
An answer to another written parliamentary question from the shadow minister for early years revealed that the forecast expenditure for the tax-free childcare scheme is £0.3bn in 2020/21, £0.5bn in 2021/22, £0.6bn in 2022/23 and £0.7bn in 2023/24:
Sector organisations have called on ministers to reallocate the underspend to settings struggling to survive in the pandemic, and said that the Tax-Free Childcare scheme needs to be better publicised to parents.
Data from HMRC, published earlier this year, found that only one in six parents who were eligible to access support through tax-free childcare have done so, leaving many families unable to access support that they are entitled to.
The Government plans to spend a further £2.1 billion on the scheme between 2020/21 – 2023/24, but Labour said there is no credible plan for ensuring that every family eligible for the support benefits from it.
Ms Siddiq, Labour’s shadow minister for children and early years, said, ‘This incompetent Government is completely failing to deliver support working parents with childcare at a time when they need it most.
‘With around half of parents struggling to access childcare and the sector on the brink of collapse, it beggars belief that ministers have repeatedly failed to get support to every family who needs it.’
Purnima Tanuku, chief executive of the National Day Nurseries Association (NDNA), said, ‘NDNA has been highlighting these annual underspends every year since Tax-Free Childcare was introduced and calling on the Government to reinvest this money into childcare which it was intended for.
‘Providers and parents are struggling due to the significant impact of Covid-19 on their finances.
‘Instead of the Treasury clawing back this money, it should be used to support providers with their sustainability by increasing their hourly rate.
‘These underspends demonstrate there is still a lack of awareness among parents around Tax-Free Childcare and the Government must make sure this scheme is better promoted. Any money set aside for childcare must only be used for that purpose as childcare is vital to get the economy back on track.’
Commenting, Neil Leitch, chief executive of the Early Years Alliance, said, ‘At a time when nurseries, pre-schools and childminders are in such desperate need of a significant increase in funding, it beggars belief that the Government would look at a huge underspend like this - money that was always intended to support parents to access childcare - and choose not to use it to support the early year sector.
‘The combination of years of underfunding for the Government’s so-called “free childcare” schemes and the impact of the coronavirus pandemic has had a devastating effect on childcare providers, and without urgent action, many simply will not survive in the long term.
‘With the take-up of Tax-Free Childcare continuing to fall far below original estimates, we urge ministers to reallocate the unused funding for this policy to where it is clearly needed. If the Government genuinely cares about early education and ensuring parents have access to the childcare they need, then supporting the sector that provides both is surely an obvious political choice.’
An HMRC spokesperson said, 'The Government is supporting families by committing almost £6 billion a year to childcare support, and the take-up is rising.
'The number of families benefiting has doubled compared to this time last year, but we are continuing to promote Tax-Free Childcare to parents by working with stakeholders to raise awareness while encouraging even more parents to apply.'