UC, childcare and controversy | CPAG

UC, childcare and controversy

01 June 2019
Issue 270 (June 2019)

Dan Norris reports on some strongly worded comment from the Work and Pensions Committee.

Frank Field, chair of the Work and Pensions Committee, has accused the government of a disrespectful attitude to witnesses who gave evidence on childcare support in universal credit (UC), and of treating the committee ‘like dirt’.1">www.parliament.uk/business/committees/committees-a-z/commons-select/work...

He made the comments as the committee took the unusual step of issuing a second report on childcare support in UC which directly challenges much of the government’s response to the original report.

The veteran MP called the DWP response ‘skimpy and disappointing’.2 He commented: ‘Overall, the response gave the impression that the Government was simply dismissing the very serious problems that are plaguing parents who are trying to get into work.’3">www.parliament.uk/business/committees/committees-a-z/commons-select/work...

Original report

The committee’s original report, published on 23 December 2018, revealed that a key objective of UC – helping claimants to return to work – depends almost entirely on claimants who are arguably most likely to need help with childcare costs: 95 per cent of the 133 million extra hours the DWP estimates will be worked annually as a consequence of the introduction of UC will be undertaken by working mothers, with 78 million extra hours taken up by lone mothers.4

‘Making childcare payments work is critical, to the success of UC,’ the report found.5

The first report published evidence showing that children in good-quality childcare ‘flourished’ while children in workless households lagged behind their peers in educational attainment and future employment prospects. Despite this testimony, the committee reported: ‘The design of universal credit childcare support directly conflicts with the aim of making it easier for claimants to work more hours.’6 Rules meaning UC claimants must wait to receive UC reimbursement for childcare costs they have paid in advance were highlighted as a major impediment to work and a driver of debt. The report contrasted in-arrears reimbursement of childcare costs, which are included in UC entitlement only after the bill is paid by low-paid parents, with tax-free childcare costs which are paid in advance when better-off parents start to save for childcare costs.

It was also noted that tax credit support for childcare was paid at a steady rate based on estimated annual childcare costs, which allowed parents to save for forthcoming bills, rather than find the money to pay up front as they do under UC.

The committee recommended that the government consider paying childcare costs directly to the provider and that it trial a deposit scheme for childcare costs, using the flexible support scheme (FSF) budget.

The original report was published days before Secretary of State Amber Rudd announced that job centres had been instructed to use the FSF to ‘smooth the way’ for parents starting work, when they faced paying childcare costs in advance. She went on to announce local pilots in which DWP staff will show ‘flexibility’ when UC claimants are unable to report childcare costs within the assessment period they paid the bill as the current rules demand. The committee has requested further details of these pilots.

Second report

The government responded on 6 March 2019. Dissatisfied with that, the committee issued a second report on 11 April 2019.7 Both of the reports emphasise that the DWP could not provide data on how the FSF was spent during the recent rollout of UC and that data from earlier years showed a ‘very small’ amount paid to meet childcare costs for claimants starting work (a situation possibly explained by one claimant’s testimony that the FSF was the ‘biggest secret in the job centre’).

The second report was scathing of the claim that detailed reporting on FSF spending would ‘detract from the discretionary nature of this fund’ and reiterated the earlier request that quarterly statistics be published to check the effectiveness of relying on FSF payments to meet upfront childcare costs.

Government response, committee reaction

The original report had questioned the claim that under UC up to 85 per cent of childcare costs could be met, while under tax credits the proportion is 70 per cent. It noted evidence that if the childcare provisions of council tax reduction, housing benefit and tax credits combine, for many, it means 96 per cent of costs can be met under legacy benefits. The report quoted evidence that 100,000 of the poorest working parents would lose childcare support by moving to UC.8

The committee concluded that the flatlining of the level of caps on maximum childcare cost (at £646.35 for one child and £1,108.04 for two or more per month) since 2005 in tax credits and UC has made childcare unaffordable for many workers and childcare provider’s businesses less sustainable. The report had recommended that the DWP model the impact of both increasing the caps on childcare costs and increasing the proportion of costs eligible for support to 100 per cent.

In response, the government promised to provide a ‘statistical ad hoc publication’ on the impact of the caps by summer 2019.

The committee highlighted testimony that increased support for childcare costs in UC could be met by reducing the household income threshold at which tax-free childcare and 30 hours free childcare are withdrawn, which currently stands at£100,000 a year, and by increasing tax receipts paid by low-paid parents.

In reply to the original report’s recommendation that it ‘divert funding from the schemes aimed at wealthier parents…towards UC childcare’,9 the government pointed to increased spending on all childcare support schemes (£6 billion in 2019/20) and described the various schemes available to working parents with differing incomes.

This response met with a withering reply from the committee: ‘We assume that [the government] has actually rejected our recommendation. We would expect it to have observed the usual courtesy of explaining why it has done so.’10

The proliferation of schemes to mitigate childcare costs for workers (including UC elements, free childcare hours and the tax-free childcare scheme) was identified in the report as confusing, exacerbated by the lack of adequate information and a comprehensive childcare costs support calculator on the childcare hub at www.childcarechoices.gov.uk. The committee concluded its second report by demanding the government review its ‘curt and dismissive’ response to ‘the very serious problems that are plaguing parents’11 outlined in the original report and provide a response which ‘matches the consideration the Committee employed in an attempt to help parents to move into work’.12

Please be aware that welfare rights law and guidance change frequently. Older Bulletin articles may be out of date. Use keywords or the search function to find more recent material on this topic.

  • 1. 2. Work and Pensions Committee, Twenty-Fifth Report, Universal Credit: childcare: government response to the Committee’s Twenty-Second Report, HC 2078, 11 April 2019 (‘Second report’), p3
  • 3. 4. Work and Pensions Committee, Twenty-Second Report, Universal Credit: childcare, HC 1771, 23 December 2018 (‘Original report’), p5
  • 5. Original report, p3
  • 6. Original report, p3
  • 7. Second report
  • 8. Original report, p32
  • 9. Original report, p26 10 Second report, p6 11 Second report, p3 12 Second report, p7
  • 10. Second report, p6
  • 11. Second report, p3
  • 12. Second report, p7