15 March 2023
If you are covering the reform to childcare provision in today’s budget, please find below a comment from Tracy Crookes, chartered financial planner at Quilter:
“The Government’s offer of 30 hours free childcare to any child older than nine months is a welcome addition to the current childcare offering, but frankly does not go far enough in solving the financial burden that parents have to take on when it comes to childcare.
“Taking the government’s average hourly funding rate for two-year-olds currently (£5.83), would suggest that on average parents could save £6,646 per year on their childcare costs with this announcement. However, each local authority calculates the hourly funding rate in their own way and it is not necessarily what the nurseries receive and as such the savings for parents can be lacking and less than expected.
“The hope is that the extension of this scheme to younger years will get people back into the workforce, however, it should not be forgotten that the 30 hours free childcare only runs during school term time – which effectively means it becomes a 22 hours free childcare scheme for working parents. They are simply left to fill the rest of the gap either from their own pocket or by giving up some element of employment. Furthermore, not all parents are aware that the free childcare hours does not include food, nappies or other provisions, so the costs still rack up.
“Parents must also remember that the 30 hours free childcare is not the only form of help available. The government will also provide up £2,000 per year in tax-free childcare, yet not everyone who is eligible claims for this as it is not the most widely known about scheme. More needs to be done to point parents in the direction of financial help when it comes to childcare, as at the moment the situation can be both daunting and confusing.
“Furthermore, today’s announcement from the Chancellor does nothing to fix the perverse high income child benefit charge that sees basic rate taxpayers lose some of their child benefit entitlement. Inflation and wage increases mean a growing number of people will be caught out by this deliberately designed quirk in the system. Given the cost-of-living crisis and the fact it is a charge that should be aimed at higher earners, it is time the government scrapped it, along with a more radical overhaul of the childcare system so that people don’t have to give up work if they don’t want to, and bring about both economic and personal financial growth.”
