Universal Credit childcare support criticised

Parents on Universal Credit can claim up to 85% of their childcare costs. However, a report by the Work and Pensions Select Committee has found that the precondition that all childcare costs must be paid in advance by those on Universal Credit places a burden on parents and therefore is a significant barrier to work.

Universal Credit claimants must pay for childcare up-front, provide receipts, and then wait to be reimbursed after the childcare has been provided. This compares to the previous system where help with childcare costs could be claimed as it was being paid, or up to seven days before the childcare costs started.

The report criticises the Universal Credit system’s design for leaving low-income households waiting weeks for support or forcing them to take on debt in order to pay for childcare costs. Some families are likely to find that, as a result, work – or working more – is unaffordable or simply does not pay.

Committee Chair Frank Field 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”.

Key findings from the report  

The report highlights a number of issues with the current design of Universal Credit, specifically:

• Claimants having to pay considerable up-front costs of childcare
• Complexity and delays associated with the system of reimbursement
• Cost of childcare exceeding the maximum reimbursement cap
• Complex interaction with other forms of support, for example, Tax-Free Childcare, and a lack of comprehensive advice for families.

Under Universal Credit, families can claim support for up to 85% of their childcare costs, compared to 70% under the legacy benefits system. This is welcomed by the Committee in its report, however it highlights that many households stand to receive less overall support than they would have under the previous system.

Households on Universal Credit may therefore already be in a precarious financial position, which managing up-front childcare costs could exacerbate. Through our research with parents and childcare providers this year, we have seen that the ability to afford and access the childcare that families require is still a significant issue.

Report recommendations

The Select Committee makes several recommendations to better support parents on Universal Credit. Its key recommendation is to develop the Universal Credit system to enable childcare costs to be paid directly to childcare providers. This would reduce the problem of prohibitive up-front costs, help claimants with budgeting and give childcare providers certainty of income.

Recognising that this could take some time to implement, the Committee makes a number of interim recommendations including:

• Supporting families to access grants through the Flexible Support Fund rather than Budgeting Advances, which are loans that must be repaid
• Updating the online Childcare Calculator available to help parents assess their options for help towards childcare costs to fully calculate Universal Credit entitlements.

Free, impartial and confidential advice

It is crucial that parents seek personalised advice on their childcare, not just at the start of a claim but also as circumstances change over time.

Employers For Childcare’s Family Benefits Advice Service was specifically set up to ensure families claim the best support available to them, particularly with childcare costs.

Call 028 9267 8200 or email hello@employersforchildcare.org to find out what financial support towards the cost of childcare is available and best suits you and your family.