Childcare proposals mean Government will pay for one day out of five

19th March 2013

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Busy Bees Benefits says that Government plans for a new system of child care mean it will be effectively funding one day’s childcare a week when the new system comes into force in 2015.

The consultancy points out that average childcare costs are on the rise with average nursery fees costing £632 per month *.

The new scheme, available from the autumn of 2015, will mean funding is offered to households where both parents work and to single parents who work with funding allocated per child.

The scheme will eventually replace the current Childcare voucher scheme which is to be phased out though it has a five year grace period.

The Government says the funding arrangements aim to improve childcare affordability for working families and will be open to more parents; those employed, self-employed and parents on low incomes or minimum wage will be eligible to use the funding. The Government will be subsidising 20 per cent towards a child’s registered childcare costs; the remaining 80 per cent will be paid by parents. This will ultimately give parents using full-time childcare, one free day each week.

Funding is available per child up to £6,000 per year, per child, potentially saving up to £1,200 per year for each child requiring childcare.

The new system will be operated by current Childcare Voucher providers who will pay childcare providers directly.

Access to the new scheme will be easier for parents as they will be able to choose the provider they want to use and not rely on employers offering a scheme as the Childcare Voucher scheme presently does.

Busy Bee Benefits points out that the existing Childcare Voucher scheme is a popular and valuable employee benefit allowing working parents to exchange part of their salary, up to £243 per month, in return for the same amount of Childcare Vouchers. These are then used to pay for the services of registered childcare providers. Using Childcare Vouchers to pay for childcare can save working parents up to £933 per year.

Both parents are entitled to join a scheme, potentially saving a family over £1800 per year on the cost of their childcare.

The Childcare Voucher scheme will continue for the next five years, giving parents the opportunity to choose whichever scheme provides the most savings for their family.

However this blog from Jelf Employee Benefits head of benefits strategy Steve Herbert, while primarily aimed at employers who currently use the scheme, points out one significant downside for families.

Herbert writes: “I particularly expect a backlash from families with single earners (and in fact my family is one such example) who will not be able to benefit from the new proposals at all (whereas they can under existing Childcare Vouchers). The initial proposals seem to allow for existing Childcare Voucher savers to continue to use this option past 2015 however, so this benefit will not just disappear from the benefits landscape overnight.”

John Woodward, Busy Bees MD is more enthusiastic: He says: “We welcome the Government’s proposal to increase the amount of financial support for working parents to help them pay for quality childcare. As the UK’s largest childcare provider and operator of the existing Childcare Voucher scheme, we understand the financial pressure parents face when paying for childcare, particularly for early years care.

“We have been campaigning to make childcare more affordable for working parents over the last 12-months. However, whilst the current Childcare Voucher scheme is an effective way of supporting working parents, it is clear that rising childcare costs and the increased demand for childcare to allow parents to return to work make the funding changes necessary, especially as it will be available to all workers, embracing the self-employed and those receiving low wages.”

The figures for average child care costs are from a report by consultancy Laing and Buisson.

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