Service quality concerns central to the government’s response to the latest Tax-Free Childcare consultation

Following the decision in May 2014 to appoint National Savings and Investments (NS&I) as the sole scheme provider to the Tax-Free-Childcare scheme, the government launched a further consultation to consider alternative providers to deliver the scheme.

The current proposal aims to replace the existing Childcare Voucher Scheme in autumn 2015 with Tax-Free Childcare, at which point childcare vouchers would continue to be available to those who already take advantage of this saving, but would be closed to new entrants.

Responses to the consultation were gathered from parents, childcare providers, childcare voucher providers and employers. On 30th July, the government’s response to this consultation was published, which can be read in full here.

Achieving quality service for parents was central to the report, as the various options of account delivery were considered. The options included;

  • Using NS&I as a sole public service based provider
  • Using a single private company as the provider
  • Allowing a competitive market with a small number of private account providers
  • An open market as in the current childcare voucher scheme

With regards to the need to be competitive, the report concluded that parents may benefit from the competition of a number of private account providers in two ways: it could lower costs and drive up service standards, as well as lead to market innovation. The government stated that “as parents will not have to pay fees for the new accounts, the potential benefits of competition for parents are limited to service standards and innovation. As such, this criterion becomes less important than it would have been had parents been changed fees for accounts”.

The government concluded that an open market model may increase service standards for parents; however, by using NS&I or HMRC to provide the accounts, the government will be able to respond quickly to parent needs for service improvements over time.

Parents were concerned about data security, as well as security of their childcare contributions. It was felt that holding accounts at HMRC or NS&I would offer additional security as they would be backed by government. The government acknowledged the current childcare voucher providers’ ‘good track record’ for fund security with childcare vouchers, and that data standards could be set for private providers.

The government felt however, that using private companies to deliver the scheme would lengthen the delivery timescale and so by eliminating it would allow them to hit their desired target date. The government felt that NS&I could utilise existing account capabilities to deliver the proposed scheme most efficiently.

As a result of this consultation, the government concluded that simplicity and account security is of key importance to parents, as well as a desire for support to be available as soon as possible. The government has reached the decision that NS&I will be the sole public company providing the scheme, in alignment with their previous decision prior to the consultation.

Click here for the full report.