The report from the Work and Pensions Committee highlights how many of the problems with the system preventing parents entering work identified by the previous committee in 2018 remain, hindering the Government’s stated ambition to encourage UC claimants to increase their working hours.
The UK has one of the most expensive childcare systems in the world and the maximum support available through UC has failed to keep pace with inflation, remaining frozen since 2016. In addition, the cap on total costs eligible for support remains the same as the rate set for Working Tax Credits in 2005, at £760 per month. This now only covers around 27 hours a week, making it hard for people to move beyond part-time work. The Committee calls for the eligible childcare costs cap to be uprated to better reflect the true cost of childcare.
The report also calls on the Government to solve the obvious barrier to work of households having to pay for childcare upfront while UC support is paid in arrears – if necessary by introducing a direct payment system. At present parents have to wait weeks for reimbursement and are often pushed into debt to meet upfront costs. If a solution cannot be found through the UC system, then childcare support should be removed from it entirely, the Committee adds.
The Committee further recommends that there needs to be more guidance available to parents to help them understand different childcare support options, and consultation with providers on how childcare costs can be more evenly spread between term time and out of term.
Rt Hon Sir Stephen Timms MP, 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.”
