Childcare reforms: MPs urge Chancellor to cut taxes to boost childcare sector

• Letter to the Chancellor of the Exchequer, dated 19 October 2023
• Education Committee

The Committee’s letter follows a response from the Department for Education to its report that was published in July. 

Chair's comments

Education Committee Chair Robin Walker MP also commented: 

“With less than a month to go before the Autumn Statement, we hope the Chancellor will continue the work he started in his Spring Budget towards reviving and expanding the country’s struggling childcare sector.  

Recognising childcare settings as the vital infrastructure that they are, my Committee believes providers should be spared the burden of having their wafer thin margins sent to the Chancellor through business rates and VAT on their purchases. Many childcare businesses feel that they are penalised by regulations that require minimum amounts of space, as this lamps them with a higher tax bill. Particularly as Government has been clear in its ambitions for this sector to expand substantially to support parents, it feels unjust that childcare businesses might cross thresholds to pay higher rates of tax purely in order to meet the demand that Government is creating.”

These sums would be small beer to the Treasury but a gamechanger for the sector, which has the power to support great numbers of talented parents back into the workforce and be an asset to the wider economy, as well promoting early development and identifying cases of special educational needs. 

The Treasury should also review its Tax-Free Childcare policy, which is poorly understood and underutilised by parents because of its complexity. Whilst there was a warm welcome for the increased funding for funded hours, it was a major disappointment to the sector that this crucial area of support was overlooked in the Spring Budget. Common sense should lead ministers towards improving the schemes for which the Government has already committed billions but which haven’t come close to reaching their full potential.” 

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