Universal Credit and childcare costs

03 August 2018

Following publication of the latest report in its ongoing inquiry into Universal Credit—Government must act on domestic abuse risk under Universal Credit—the Work and Pensions Committee is calling for evidence in the latest strand of this work, on childcare costs.

Childcare as a barrier to work

Paying for childcare is one of the biggest barriers parents face when thinking about returning to work or looking for a better paid job.

A significant factor is how quickly parents can get help with the cost of childcare before starting a new job. This is exacerbated by the fact that most childcare providers ask parents to pay for the first month before their child can take up a place. Sometimes a whole term’s payment is requested. Many providers also charge deposits, registration fees and other fees in advance.

Few low-income parents have the savings needed to cover these upfront costs. Smaller childcare providers may not be able to fulfil the Universal Credit system’s invoicing requirements.

Support for childcare costs under Universal Credit

Universal Credit provides more generous support for childcare. But research has shown that the design of Universal Credit can make it harder for low-income parents to access the improved childcare support on offer. Several issues have been identified, for example:

  • Parents have to cover initial childcare costs, get a receipt from their provider, submit this to the DWP and wait to be reimbursed.
  • Parents are reimbursed at the end of their monthly ‘assessment period’, which depends on when their Universal Credit claim started. If they are unable to submit receipts before the end of their assessment period, they would not receive their money until the next assessment period. This means parents may have to wait up to two months to get paid.
  • Parents are currently required to take their receipts in person to the jobcentre, or send them by post, with no option to scan and send them electronically. Some small childcare providers will only issue a handwritten receipt at best, which may not be accepted by the jobcentre.
  • Parents often face higher childcare costs in the holidays when they cannot use free hours. Under Universal Credit, parents may find themselves having to pay a much larger advance childcare bill.

Get involved

The Committee invites evidence from any and all interested parties on any or all of the following questions. Your evidence will be incorporated into the conclusions of this phase of the inquiry:

  • How does access to childcare support under Universal Credit compare to the legacy system and the new Tax-Free Childcare system?
  • Is the available support sufficient to cover locally available childcare costs? Does it reflect actual childcare costs and if not, how should it be updated?
  • How do upfront payments and the structure of reimbursements under UC affect low-income parents, including in their decisions to access childcare and take up work?
  • How is monthly reporting and assessment working in practice and how could it be improved?
  • Are existing sources of support—including the Flexible Support Fund and budgeting advances—available to low0income parents faced with upfront childcare costs adequate? If not, why not?
  • Are claimants made aware of the support made available to them and are work coaches adequately trained to give appropriate guidance on this issue?
  • How could the Government improve the system for supporting low-income parents’ access to support for childcare under Universal Credit?

If you wish to submit evidence to this strand of the inquiry, the deadline to do so is Wednesday 5 September 2018.

Heidi Allen MP, Committee Member, said:

"Childcare remains one of the key enablers for people to be able to move into and stay in employment, so it is vital that this part of the Universal Credit system works. Anecdotal evidence suggests that the validation and payment of childcare costs does not operate as smoothly as it needs to and that accessing affordable childcare can also be a challenge. Whilst the IT and final design of Universal Credit is still being developed, now is the time to get this right."

Rt Hon Frank Field MP, Chair of the Committee, said: 

"Universal Credit aims to "make work pay". What good is that though if parents are unable to access the childcare that enables them to turn up on day one of a new job? This inquiry aims to establish what we need to do to ensure that childcare is really available, and accessible, in line with the realities of life for the many working parents—and parents who’d like to be working—who need it."

Further information

Image: iStockphoto

Share this page