The way childcare costs are paid in Universal Credit “directly
conflicts” with the Government’s key aim for the policy: getting
more people into work, says a report published today by the Work
and Pensions Committee.
A key benefit DWP has claimed for Universal Credit is that it
will see an additional 200,000 people move into work, and
that the UK’s workforce will contribute over
100,000 million additional hours every
year under the new benefit system. But its
success or failure in achieving these aims depends largely
on working parents.
Universal Credit claimants must pay for
childcare up-front and claim
reimbursement from the Department after
the childcare has been provided.
This can leave households waiting weeks or even
months to be paid back. Many of those households will be in
precarious financial positions. Too many
will face a stark choice:
turn down a job offer, or get themselves into
debt – to DWP, or to friends, family or other loan providers
- in order to pay for childcare. The Department says
that its approach to reimbursing
childcare costs under UC is intended
to reduce rates high rates of fraud and
error in the legacy system. But prioritising
this objective has created a barrier to employment that will be
insurmountable for some households.
The Department has suggested “Budgeting Advances” as a solution
for parents struggling with the costs of childcare, claiming that
they are "not a loan but an advance" of Universal Credit
entitlement. The Committee says this is simply “untrue”.
The Government's own website is
clear that Budgeting Advances are loans:
debts that must be repaid.
Claimants who are already
struggling with ongoing costs should
not be expected or encouraged
to take on extra loans and debt in order to be
able to get or keep a job. The Committee has previously expressed
grave concerns over DWP’s approach to reclaiming debt. The
Department is responsible for designing the barriers to work in
to Universal Credit childcare support: it must
shoulder responsibility for fixing them.
The Committee says:
-Direct payments of UC childcare support
to childcare providers would alleviate the
problem of upfront costs, give childcare providers
much-needed certainty of income, and substantially reduce the
risk of fraud and error. The Department’s
objection that its IT systems as currently configured could not
cope with direct payments and changing them “will take some time”
does not counter the necessity or rightness of making those
changes.
- As things stand, some 100,000 households - including the
poorest - will receive less for their childcare costs than
under the legacy system, and the value of payments has already
eroded every year: the maximum amount DWP will reimburse has not
increased since 2005. The Committee says Government should review
the maximum amount and percentage of childcare costs that can be
reimbursed under Universal Credit, modelling the effect of
increasing them on parents’ participation in work and introducing
London weighting to account for the very high childcare costs in
the capital. The Department should carry out this work and
implement the best of the two options before it starts so-called
"managed migration" – transferring claimants of existing benefits
to UC.
- It is unacceptable that households claiming Universal Credit -
amongst them the poorest in society - are struggling with
childcare costs while the Government is funding support for
households earning up to £200,000 per year. The Government should
divert funding from the schemes aimed at wealthier parents (Tax
Free Childcare and the 30 hours free childcare) towards Universal
Credit childcare.
- Every JCP has a “Flexible Support Fund”, a budget to
provide non-repayable, discretionary
grants to help people overcome barriers
to work. This should be invaluable
to claimants struggling with the upfront
costs of childcare. But the Committee heard that the Fund was
“the biggest secret in the Jobcentre” – little known and
under-used. The Department’s limited data shows the FSF has been
underspent in every year since 2012-13, and the proportion spent
on childcare is minute. DWP should start to monitor the use
and impact of the FSF.
Rt Hon MP, Chair of the Committee,
said: “If the Government had set out to design a system to make
it harder for parents to get into work, it could hardly have done
better than this one. It’s not just driving parents into despair
and debt and creating problems for childcare providers—it’s also
actively working to prevent the Government achieving its own aim
of getting more people into work. And it is simply irresponsible
of Government to suggest that the way around this policy’s
inherent problems is for struggling, striving parents to take on
more debt - still more so to claim, untruthfully, that it is not
a debt at all. It clearly is.
“This is about more than employment figures. Good quality
childcare enhances a child’s life chances—and that enhances our
society and our economy. If the Government doesn’t sort this out,
Universal Credit childcare support will work against all that
good, as well as against the objectives of Universal Credit
itself.”/ends
