Help with the costs of childcare available through Universal
Credit is only enough to cover part-time hours and can act as a
barrier to parents who want to work longer, MPs warn today, in a
report that calls for financial support to better reflect present
day prices.
The report from the Work and Pensions Committee
highlights how many of the problems with the system preventing
parents entering work identified by the previous committee in
2018 remain, hindering the Government’s stated ambition to
encourage UC claimants to increase their working hours.
The UK has one of the most expensive childcare systems in the
world and the maximum support available through UC has failed to
keep pace with inflation, remaining frozen since 2016. In
addition, the cap on total costs eligible for support remains the
same as the rate set for Working Tax Credits in 2005, at £760 per
month. This now only covers around 27 hours a week, making it
hard for people to move beyond part-time work. The Committee
calls for the eligible childcare costs cap to be uprated to
better reflect the true cost of childcare.
The report also calls on the Government to solve the obvious
barrier to work of households having to pay for childcare upfront
while UC support is paid in arrears - if necessary by introducing
a direct payment system. At present parents have to wait weeks
for reimbursement and are often pushed into debt to meet upfront
costs. If a solution cannot be found through the UC system, then
childcare support should be removed from it entirely, the
Committee adds.
The Committee further recommends that there needs to be more
guidance available to parents to help them understand different
childcare support options, and consultation with providers on how
childcare costs can be more evenly spread between term time and
out of term.
Rt Hon Sir MP, Chair of the Work and
Pensions Committee, said: “Many parents supported by
Universal Credit want to work or work longer to provide for their
families but are prisoners to the high cost of childcare and a
system that requires upfront payment and the invidious choice of
taking on debt or turning down work.
A reassessment of the eligible childcare costs cap is clearly
long overdue and a move away from forcing parents to pick up the
cost of childcare before receiving benefits is also vital if
families are to have access to good quality and affordable
childcare. This is key not just to helping parents to increase
their hours but also for the transformative impact it can have on
the lives of children.
The Government has known about the flaws in the system for
years. With the Chancellor reiterating in his Autumn Statement an
ambition that Universal Credit should be there to help claimants
to take on more work during the cost of living crisis, now must
finally be the time for action.”
Main findings and recommendations
Upfront costs
- Childcare support via UC requires families to first meet
up-front costs, both initially and on an ongoing basis. DWP and
DfE need to work together to overcome this obvious barrier to
work, if necessary by establishing a direct payment system
modelled on those used elsewhere. If this cannot be achieved
within the UC system, then childcare support should be removed
from it entirely, with a solution based on a single childcare
account implemented.
- The Government should amend the regulations on the use of the
Flexible Support Fund so that receipts for payments made from the
Fund can be submitted as if the parent had paid the childcare
costs themselves. This would have the effect of removing, or
largely offsetting the upfront cost, rather than simply pushing
it in to the next month.
Caps and maximum reimbursement
- Support for childcare for some of the poorest families in the
country has failed to keep pace with inflation because the
maximum cap of childcare that can be claimed for has stayed at
the same level since 2005.
- The Government should uprate the childcare cost caps to
better reflect the true cost of childcare in 2022, and then index
them annually.
Understanding support and eligibility
- The wide range of childcare support schemes available to
people claiming UC makes it very difficult for parents to
understand the best option for them. DWP should develop childcare
specialist Jobcentre Plus Work Coaches and a single portal for
accessing childcare information.
Childcare industry
- The current system for receiving childcare reimbursements is
failing those on UC and often leads to further debt and/or
compromising circumstances. DWP should consult with providers on
a way to split costs evenly during term time and out of term.
