Universal Credit childcare costs preventing parents from working, say MPs

The UK has one of the most costly child-care systems in the world.

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A new study from the Work and Pensions Committee illustrates how longstanding issues with the benefits system impede parents from entering the workforce or working greater hours.

MPs believe that this impedes the government’s declared goal of encouraging Universal Credit recipients to increase their work hours.

The United Kingdom has one of the most costly child-care systems in the world, and the maximum help available under UC has been fixed since 2016 despite inflation.

In addition, the monthly maximum on total qualifying expenses remains the same as the rate established for Working Tax Credits in 2005, at just £760.

This currently only covers about 27 hours per week, making it difficult for individuals to go beyond part-time employment. The Committee suggests that the ceiling on qualified child care expenses be increased to properly represent the actual cost of childcare.

The study also urges the government to eliminate the clear obstacle to employment posed by the fact that households must pay for childcare in advance while UC support is paid in arrears, if necessary by instituting a direct payment system.

Currently, parents must wait weeks for payment and frequently incur debt to cover upfront fees. The Committee says that if no solution can be found through the UC system, child care assistance should be eliminated outright.

In addition, the Committee advises that there be greater assistance accessible to parents to help them understand the various childcare support options, as well as discussions with childcare providers on how costs might be more equitably distributed between term time and school holidays.

Sir Stephen Timms MP (Labour), 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.”

A DWP spokesperson said: “Universal Credit’s childcare offer is carefully designed to support parents into work, paying up to 85% of their childcare costs (up to a maximum of £646.35 a month) which is significantly more generous than the legacy system.

“Work coaches can help claimants get up to a month’s support before starting a job regardless of the number of hours worked.

“The government has spent more than £20 billion over the past five years to support with the cost of childcare, empowering providers and ensuring families can access the help they are entitled to while saving money on their bills.”

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