News story

GLD win to benefit up to 1.9 million families

The Government Legal Department’s Commercial Law Group has won a landmark procurement case which could benefit up to 1.9 million families in the UK

Building blocks
Building blocks

A new tax-free childcare initiative being rolled-out by HMRC and run by NS&I (National Savings and Investments) is due to replace the existing Employer-Supported Childcare scheme in early 2017. The scheme helps with the cost of childcare, enabling more parents to go out to work, if they want to, to provide greater security for their families.

The existing scheme is offered by fewer than 5% of employers, and also disadvantages single-parent families by paying two-parent families twice as much support. The new scheme will deal with these defects: it will offer support to all parents regardless of their employer, including parents who are self-employed or on the minimum wage, support will not be dependent on the number of parents in the household, and it will be provided on a per child basis, ensuring those with the greatest childcare needs will be able to access more support.

The challenge

Legal challenge was brought by Edenred, the existing provider of childcare vouchers, over the government’s decision to award the Tax-free Childcare contract to NS&I, without opening it up to tender. The Commercial Law Group acted for HM Treasury, HMRC and NS&I and on 1 July, the Supreme Court ruled that the government‘s proposal was lawful.

The success of this case sets an important precedent that Memoranda of Understanding (MoU) between public bodies, such as that between HMRC and NS&I (National Savings and Investments), are not public contracts and therefore do not have to comply with public contract regulations. Arrangements between public bodies are usually documented by MoUs, rather than formal contracts.

Edenred’s second challenge was that NS&I’s outsourcing contractor Atos would benefit from an additional £132m of new work on top of their existing contract of £660m. Edenred argued that this was a material variation to the contract and should have been put out to open tender. However Atos’s existing contract with NS&I allowed for an expansion of services and it was clear that expansion was likely when the contract was procured. Because of this, the Supreme Court ruled that the amendment was lawful.

Wendy Hardaker, Head of the Commercial Law Group, said:

This case was a success as a result of the hard work of teams from across GLD. And I’m proud that many hardworking families around the country will benefit as a result of our efforts.

The existing voucher scheme will continue to run but will be closed to new entrants.

Published 20 July 2015