LONDON (Reuters) – British childcare is among the most expensive in the world and the government is being urged to do more to help with the costs in order to boost workforce participation among parents of young children, particularly women.
The government says it has spent more than 4 billion pounds ($4.8 billion) a year for the last five years helping families with the cost of childcare.
Below is a summary of the existing help available in England. There are similar schemes in Scotland and Wales.
TAX-FREE CHILDCARE
Launched in 2018, this allows working parents to receive up to 500 pounds every three months per child towards the cost of childcare, or 1,000 pounds every three months for disabled children.
For every 8 pounds paid into a tax-free childcare account up to the quarterly limit, the government tops it up by 2 pounds, effectively refunding parents the 20% rate of income tax on the money.
The funds can then be used to pay an approved childcare provider, as long as they are signed up to the scheme.
To be eligible, both parents must be working more than 16 hours a week at minimum wage, with neither earning more than 100,000 pounds a year net.
Children aged 11 or under are eligible, so this scheme can also be used to help fund wraparound care and holiday clubs once children are in school.
CHILDCARE VOUCHERS
This scheme is closed to new applicants, having been replaced by tax-free childcare, but is still used by many who were signed up to it before 2018.
It allows parents to take up to 55 pounds a week of their wages free of tax or National Insurance to use to buy vouchers to spend on childcare.
FREE HOURS FOR 2-YEAR-OLDS
Some 2-year-olds in England, such as those whose parents receive certain social security payments due to low income, as well as some disabled children, are entitled to 15 hours a week of free childcare for 38 weeks a year.
FREE HOURS FOR 3- AND 4-YEAR OLDS
All 3- and 4-year-olds in England are entitled to 570 hours free childcare per year, usually offered as 15 hours a week across 38 weeks of the year. It is available from the term after a child’s third birthday.
Many children are entitled to an additional 15 hours, taking the total to 30 hours a week.
To be entitled to the additional 15 hours, both parents must be working more than 16 hours a week at minimum wage, but neither can earn more than 100,000 pounds a year net.
In reality the hours are often not free, but at reduced cost. Childcare providers are allowed to charge extra for things such as meals and nappies, with some also setting a minimum number of days a week children must attend the nursery to be eligible.
For most childcare settings the cost of providing the free childcare is significantly higher than the funding received from the government, putting providers under financial strain or forcing them to put up prices for non-funded hours.
WORKING TAX CREDITS
Those who receive working tax credit can claim an extra amount to help cover the cost of childcare. This is up to 122.50 pounds a week for one child, or 210 pounds for 2 or more children.
UNIVERSAL CREDIT
Universal Credit is in the process of replacing several social security payments, including working tax credits.
Those now receiving Universal Credit can claim back up to 85% of their childcare costs if they are working, up to a maximum of 646 pounds a month for one child and 1,108 pounds for two or more children.
The money can be used to pay for nurseries and childminders as well as school holiday clubs and wraparound care, but parents need to pay the childcare costs up front and then claim the money back from the government.
($1 = 0.8322 pounds)
(Reporting by Kylie MacLellan; Editing by Catherine Evans)
