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Sat, 4 February 2023

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By Dr Simon Kaye
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Reforming childcare support through universal credit changes should be a priority for the government in 2023

Reforming childcare support through universal credit changes should be a priority for the government in 2023

Childcare (Credit: Gary Hider / Alamy Stock Photo)

4 min read

Global pressures and our post-pandemic world mean we have experienced one of the most financially tough years in recent memory. We must hope that Christmas can provide at least a small amount of respite and family time for parents who work so hard to provide for their children.

So, as the new year dawns, parliamentarians and campaigners will redouble their efforts to improve aspects of the universal credit system that are affecting choices and opportunities for families.  

Many parents want to take on more hours to provide for their children.  Yet despite the Chancellor stating in the recent Autumn Statement that universal credit should be helping people to do just that, the current set-up for childcare support is acting as a barrier.  

A recent report from the cross-party House of Commons Work and Pensions Committee calls on the government to address a system that is trapping parents outside full-time work.  While the universal childcare offer is good, the fact only 13 per cent of eligible parents use it and we have 1.2m job vacancies tells us we need change.  

“The government should investigate uprating the eligible childcare costs cap to better reflect the true cost of childcare in 2023”

The committee heard evidence from parents who feel prisoners to the cost of childcare in the United Kingdom when it is up there with the most expensive in the world.

Throughout our inquiry, parents were clear that being required to meet the cost of childcare upfront leads to some unenviable choices. It forces them to take on debt, cut back on other essentials, rely on family and friends for support, or give up work altogether.  The hellishly complicated system for refunding parents also means they do not know how much they will get back after paying upfront. 

Vikki Waterman, a campaigner with Save the Children, a charity that has long campaigned on this issue, was one of many who shared her experiences with the committee. She told us about her struggle to afford upfront childcare costs when she returned to work. She was forced to borrow money from family and friends to cover the fees, eventually having to leave her childcare provider because she could not afford it.  She took unpaid leave in the end while she tried to find an alternative. 

This is an obvious problem with the system that needs to be solved and childcare providers are desperate to see change too.  Other schemes like Tax Free Childcare allow reimbursement in advance. An upfront payment model is clearly possible. 

Vikki Waterman
Vikki Waterman (Credit: PA Images / Alamy Stock Photo)

A practical way must be found to make payments through universal credit work for those it is there to support. If this cannot be done, then childcare support should be removed from universal credit entirely and a separate solution found alongside wider childcare policy reforms.

On costs, the maximum help with childcare available through universal credit has failed to keep pace with inflation, remaining frozen since 2016. It is also based on the same £760 a month total eligible childcare costs that the government has used for Working Tax Credits since 2005.  We were informed that this mainly affects families in large cities where costs are higher.  

Take an example of a family in 2008 receiving Working Tax Credit, looking for full-time childcare for their one-year-old. They could be reimbursed for 38 out of the 50 hours of care they required. Fast forward to now and the same family on universal credit would be eligible for support for just 27 of those 50 hours.

The government should investigate uprating the eligible childcare costs cap to better reflect the true cost of childcare in 2023. 

Ministers have known about the flaws in the system we set out in our report for years.  Our predecessor committee highlighted problems preventing parents entering work as far back as 2018.  The current cost of living crisis, with families facing the highest rate of inflation for a generation, along with the government’s efforts to assist the economically inactive back into work and employers crying out for more workers, makes the case for solving these problems even more pressing. 

The benefits of childcare beyond helping parents into work should also not be underestimated. As we also heard during our inquiry, good quality early education can make an enormous difference to early development and the long-term life chances of our young people.

There will undoubtably be lots of challenges for the government in the coming 12 months.  It does however have a chance to get off on the right foot by making small changes to universal credit that will make a substantial difference.   

All parents are asking is to be helped to work so they can provide for their loved ones. In 2023, it is time the government finally listened and fixed the system for good.

Stephen Timms, Labour MP for East Ham and Siobhan Baillie, Conservative MP for Stroud

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