Tax-free childcare announcement: ISER and IFS researchers respond

Following the government’s announcement extending support to help families with children under 12 with childcare costs, Professor Mike Brewer, Professor of Economics at ISER and Research Fellow at the Institute of Fiscal Studies has co-authored a response analysing the implications with IFS colleagues, Claire Crawford and Sarah Cattan.

Writing for the Institute for Fiscal Studies Observations: Reflections on current events series, the researchers state:

“Surprisingly, today’s announcements come with no new money. Extending the new Tax Free Childcare scheme to all children under 12 within its first year will cost money compared with a world where it was limited to children under 5, but the Treasury can make this announcement without altering its public spending plans because it has significantly revised down its estimate of how many families are likely to be eligible for the scheme (from 2.5 million to 1.9 million).

It is not clear what has led to this dramatic change, and so we cannot judge whether these new estimates are any more plausible than the initial ones, but the fact that the change is so large suggests that the Treasury would benefit from being more open about the way it costs new policies. The increased generosity of support for childcare under Universal Credit will be matched by savings elsewhere in Universal Credit that will be confirmed in the autumn."


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