18 Mar 2014

Magic numbers – free expansion of childcare

It’s not entirely clear how the Treasury got to boost its provision of childcare help without spending more money. Treasury spokespeople tell you it’s because of revising down the estimate for the number of families who’ll benefit – that must be a euphemism for a “howler” in the original sums.

They also say they’ll save money because they’re not franchising out the administration of the system to the private sector. You may recall a lot of government operations are farmed out on the promise of savings. Apparently this one saves staying “in house” because so many of the systems are already in place at National Savings and Investments. Another interesting saving mentioned is the one that comes from lower fraud.

You might think – the IFS certainly does – that a system that allows you up to £2,000 per child per year if you can prove you’re earning £50 a week might just incentivise a few partners of someone on a bigger salary to magic up some sort of receipt for £50 weekly services, opening up a new stream of fraud.

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The Treasury also says a contribution to the new expansion of the scheme is coming from phasing out the old voucher system – no new applicants for that after autumn 2015 – though they had said at last March’s budget that they were phasing it out .

We would know what all these savings amount to if we knew what the Treasury said was the total extra cost of the two new pieces of generosity: raising the subsidy by £800 and raising the relevant age cohort to 12. But alas, as I write, that figure is not available.

It was striking when the original scheme was first announced in 2013 that this was an expansion of the welfare state when so much was being frozen or cut back, often through means testing.

Like free school meals, announced at the Lib Dem conference last autumn (and recently under savage attack by Michael Gove’s former special adviser), this expansion of the welfare state spends more on the better off than the poorest. As the IFS points out, there are relatively few parents who spend at or close to £10,000 a year on childcare.

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