Laura Suter, head of personal finance at AJ Bell, comments on the Department for Education’s announcement on its new free hours childcare scheme:
“Parents of children born in April 2022 or before will be able to apply for 15 hours of free childcare from the new year, as the government will roll out its new scheme. Working parents of two year olds can apply from 2 January to get the funding from April to help with nursery and childminder costs.
“While the funding will be a welcome boost to household budgets, parents in the existing scheme are all too aware that 15 free hours doesn’t actually equate to that in reality. Firstly, the hours are for term-time only – meaning that parents who work the standard 52 weeks of the year will have a 14-week shortfall in the free hours. At the same time, nurseries and childminders often charge extra fees for additional hours, food, nappies or activity costs. It means that while the free hours save parents some money, they rarely provide a free ride for a kid in childcare for 15 hours a week.
“The government’s move to increase the funding rates it pays childcare providers should help to reduce these additional costs for parents, but many nurseries will still find they have a shortfall between what they charge and what the government is willing to pay them – and parents must plug that gap.
“Hopefully the government will put a lot of marketing heft behind this new handout, to ensure that parents who are eligible claim the money. We already know that similar schemes, such as tax-free childcare, child benefit and the 30-free hours are underclaimed.
“It’s frustrating for parents that they have to actively claim these new free hours rather than being automatically awarded them. Under the current system all parents are eligible for 15 free hours from the term after their child turns three, however, it’s automatically claimed by the nursery rather than parents having to apply for it. The difference with the new system is that parents have to be working to claim the new 15 free hours, putting a complication in place that presumably prevents the government adopting the same automatic system for these new childcare hours. But doing so would ensure far higher uptake and that all eligible parents get access to the support.”
