Universal Credit childcare payment rules stopping parents from getting into work, say MPs

Posted On: 
23rd December 2018

Universal Credit is failing parents who are trying to get into work because they are unable to afford the childcare fees up-front, MPs have revealed.

The childcare payments system within Universal Credit'directly conflicts' with its key aim

The new benefits system requires parents to fork out for childcare ahead of receiving their payments, and then claim it back.

However the Work and Pensions Committee says the arrangement "directly conflicts" with the Government's aim of getting more claimants back into work and leads to many parents being forced to weigh up whether to turn down a job offer or get into more debt.

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They say pushing parents into owing more is “irresponsible” and ministers should halt the roll-out of the programme until Job Centres are able to pay childcare providers directly.

The intervention comes amid ministers' fear that handing parents the cash to pay childcare providers risks high rates of fraud and error which were a problem of the previous system.

Universal Credit has been beset by problems and delays since it was first announced eight years ago, with the Chancellor forced to pledge new cash at the Budget to protect claimants.

Elsewhere in the report, the committee says the Government should better publicise the “Flexible Support Fund” – which it brands “the biggest secret in the Jobcentre” – allowing more parents access to non-repayable grants to allow them to overcome barriers to work. 

The group has also called for a review of the maximum amount that can be reimbursed in childcare costs, given the cap has not shifted since 2005, and to look at increasing it depending on parents' participation in work.

Some 100,000 households, among them the poorest, will receive less for their childcare costs than under the old system as it stands, they say.

Elsewhere the group says ministers should divert cash from schemes such as the 30 hours of free childcare from families which earn up to £200k a year to those who need it most.

Chair of the Committee, Frank Field, said Universal Credit is at risk of standing in the way of the benefits of childcare, which he says "enhances a child’s life chances" and therefore society and the economy.

“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," he said.

“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."

A spokesperson for the Department for Work and Pensions said: “This report doesn’t acknowledge that with Universal Credit childcare is more generous.

“Working parents can claim back up to 85% of eligible costs, compared to 70% on the old system.

“Universal Credit is a force for good for many and people are getting into work faster and staying in work longer.

“Recent Budget changes also mean an extra £2 billion will be directed to the poorest families.”