The way childcare costs are paid in Universal Credit is “driving parents into despair and debt” and undermines the Government’s intention of getting more people into work, according to a new report from the Work and Pensions Select Committee (WPSC).
The influential cross-party group of MPs says the success or failure of the flagship welfare reform depends largely on the new benefit’s ability to incentivise more parents into work.
Universal Credit claimants are expected to pay childcare costs up-front, long before they receive initial payments, and claim reimbursement from the Department for Work and Pensions (DWP) only after the childcare has been provided.
The Committee argues that this can leave families waiting weeks or even months to be paid back, with many families already struggling to make ends meet.
This leaves parents in an extremely difficult position, meaning they may be forced to turn down job offers or risk getting into debt in order to pay the upfront chilcare fees.
The DWP has suggested “Budgeting Advances” as a solution for parents struggling with the costs of childcare, claiming that they are “not a loan but an advance” of Universal Credit entitlement.
But the WPSC says this is simply “untrue”, because the Government’s own website admits that Budgeting Advances are loans – debts that must be repaid over time.
“Claimants who are already struggling with ongoing costs should not be expected or encouraged to take on extra loans and debt in order to be able to get or keep a job”, the Committee says.
Frank Field MP, Chair of the Committee, 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.
“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.
“This is about more than employment figures. Good quality childcare enhances a child’s life chances—and that enhances our society and our economy.
“If the Government doesn’t sort this out, Universal Credit childcare support will work against all that good, as well as against the objectives of Universal Credit itself.”