Report calls for help with upfront childcare fees

A report from a Government select committee calls for more childcare help for Universal Credit claimants.



Help with upfront childcare fees

The design of Universal Credit childcare support directly conflicts with the aim of making it easier for claimants to work, or to work more hours, according to a new report.

The report by the Work and Pensions Select Committee says the fact Universal Credit claimants must pay for childcare up-front and claim reimbursement from the Department after the childcare has been provided can leave households waiting weeks or even months to be paid back, exacerbating any existing financial problems. It states: “Too many will face a stark choice: turn down a job offer, or get themselves into debt in order to pay for childcare. The Department says that its approach to reimbursing childcare costs under UC is intended to reduce high rates of fraud and error in the legacy system. But in prioritising this objective it has created a barrier to employment. For some households this will be insurmountable.”

Direct payment of childcare fees

It calls for direct payments of Universal Credit childcare fees to providers, saying it would alleviate the problem of upfront costs, give providers much-needed certainty of income and substantially reduce the risk of fraud and error. It acknowledges that it would take time to implement this, but says it is the right thing to do.

In the meantime, it calls on the Department for Work and Pensions to  do more to help claimants with upfront costs. It currently offers two options: Budgeting Advances, and the Flexible Support Fund (FSF). The report says Budgeting Advances are not the solution as they place claimants in debt. It therefore favours the FSF. It offers non-repayable, discretionary grants to help claimants overcome barriers to work.

The report says the Fund has been underspent in every year since 2012–13 and states that the proportion spent on childcare is “minute” and that there is little data on usage. It urges the Department to collect more data and promote the Fund more.

Other recommendations include the trialling of a childcare deposit scheme and modelling the impact of increasing reimbursements or the maximum cap on reimbursements for childcare on take-up of childcare. The cap has not risen since 2005.

The report also calls for money for Tax-Free Childcare should be diverted to help the poorest households. It states: “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 via the Tax Free Childcare and 30 free hours schemes.”

In addition the report calls for more advice for those on Universal Credit of the options available to them for childcare, including updating the Childcare Calculator to fully calculate Universal Credit entitlement as it currently does for tax credits.

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