Universal Credit: childcare Contents

2Managing upfront costs

10.Parents and carers in England who want to claim help with paying for childcare have six schemes that may be available to them:19

i)Universal Credit childcare support. Childcare support via UC is available to claimants who are in work or have a job offer. Claimants are required to arrange childcare with a provider themselves and pay for it upfront. They must then submit receipts (rather than invoices) to the Department for reimbursement after the childcare has been provided (rather than after it has been paid for, which may be earlier).20 They are paid back monthly in arrears, at the same time as they receive their UC payment.21

ii)The childcare element of Working Tax Credit (WTC) is available to parents working for at least 16 hours per week. It is claimed in the same annual assessment as for tax credits. Claimants have to estimate their weekly childcare costs over the year, which they are then reimbursed alongside their tax credit payments. They can put in a claim for support as soon as they have paid for childcare, and up to a week (seven days) days before it starts. Working Tax Credit is gradually being replaced by UC.22

iii)Tax Free Childcare (TFC). This is available to people who are in work and earning at least the equivalent of 16 hours per week at NMW/NLW (currently £125 per week for claimants aged 25 and over), up to a maximum taxable individual income of £100,000 per year (£200,000 per couple household). TFC claimants do not have to meet the full costs of childcare up-front. Instead, they pay money into an online account which the Government tops up with £2 for every £8 paid in, up to a maximum of £2,000 per year, per child.23

iv)Parents of 3–4 year olds may also be able to claim 30 hours of free childcare per week. This has similar eligibility conditions as TFC.24

v)All parents of 3–4 year olds are entitled to 15 hours of free childcare per week.25

vi)Parents of two year olds who are receiving some means-tested benefits (including UC if they are on a low income from work) can also receive 15 free hours per week.26

11.The Department told us that childcare support in UC is intended to address “high levels of fraud and error inherent in the Tax Credits system”. It explained that these “often resulted in overpayments and difficulty verifying childcare providers”.27 Save the Children and the Centre for Social Justice told us that the source of this difficulty was the requirement to estimate childcare costs as part of the annual tax credit assessment. This can be “difficult for parents to do accurately and the system is then also unresponsive to changing circumstances”.28 They described WTC childcare support as “riddled by complexity, error and overpayments”. For example:29

In 2011 [ … ] 16.6 per cent (£265 million) of the total spend on the childcare element of WTC was claimed erroneously or fraudulently–more than double the rate for WTC overall (the vast majority of this is likely to be due to error, rather than fraud). And the problems caused by complexity have persisted; in 2015–16, for example, there were 0.2 million misstatements for the childcare element of WTC alone, costing the taxpayer around £210 million.

12.UC aims to address this problem by requiring parents to pay childcare costs themselves, report them to the Department each month, and receive reimbursement them once the childcare has actually been provided. This should greatly reduce the scope for over- and under-claiming. The Department said this system “provides greater accuracy and flexibility because each payment is based on the actual amount people spend on childcare”.30 Save the Children and the Centre for Social Justice explained that UC should enable the Department to “adjust support each month in a far more sophisticated and efficient way through the real time PAYE information employers report to HMRC”.31 The UC system for reimbursing childcare costs is expected to save £100 million relative to the legacy system in fraud and error payments.32

13.We heard, however, that in seeking to minimise fraud and error, the way childcare costs are reimbursed under UC can make it difficult, or even impossible, for claimants to manage the cost of childcare. Under WTC, parents and carers could start claiming as soon as they started paying, and could put in a claim seven days in advance of childcare starting. They could also opt to receive payment weekly and to spread costs over the year, even if they only use childcare for some of the year (for example, during term-time). Citizens Advice explained that this means that claimants “could receive part-reimbursement for childcare costs” that will not need to be paid until months later. Citizens Advice told us that this is the “primary difference” between UC and the legacy system.33 UC childcare requires claimants to pay for childcare themselves, and then reclaim it only once the childcare has been provided. Steven McIntosh, Director of UK Poverty Policy, Advocacy and Campaigns at Save the Children, set out for us the large up-front sums of money that this can involve:

If you have a one-year-old, so you are returning to work after maternity leave or take a year’s break to have a child, a full-time place for a one-year-old, the up-front cost, which is a deposit and the advance payments, might be as much as £1,000. Even through the spectrum, if you are looking at a full-time place for a two year old, it is £880. Even for a three or four-year-old, including the 30 hours of free provision, you are still looking at £300 to £400. The idea that families who have spent time out of the workforce have £1,000 lying around to pay those costs up front is patently absurd.34

Case study 2: Gaynor

Gaynor is a single mum of three from Manchester who is receiving childcare support through Universal Credit. She has an 8 year old son and 3 year old twins, and runs her own mobile hairdressing business, which she has had for 17 years. Gaynor struggles every month with upfront childcare payments due to being self-employed, and at times the situation has made her so stressed she has had to stop working for a while.

Her twins are in childcare for three days and she pays £188 a week. She’s entitled to 85% of the costs reimbursed, but her payments are delayed and inconsistent. Gaynor is forced to rely on her parents and friends to help her family out when she can’t afford the upfront costs.

She says: “How is anyone supposed to find the money to pay for childcare in advance? It’s very, very stressful. I owe my mum and dad thousands, if it wasn’t for them I would have to give up work and I’d be living off food banks.”

Gaynor is trapped in a constant cycle of appointments and phone calls with the Jobcentre trying to get her childcare payments sorted as she keeps receiving the wrong amounts and being told conflicting information about what she is entitled to. And all of this uses up time when she wants to be working:

You have to fork out the money in advance anyway, then you’ve got to go into the Jobcentre to make an appointment to send the receipt off or you don’t get it. And then they don’t always pay it anyway. Last month they didn’t pay. I was told it’s because I’m not entitled to it. My Coach says I’m entitled to 85%. But the childcare team told me I’m not. I’m in the middle of this. I’m still waiting for a phone call back from them and I’ve got another appointment with them tomorrow. I’m supposed to be working but I’m doing this.

Gaynor told us:

I have just switched Work Coaches now. My first Work Coach did not have a clue. He has not helped me along the way. I have not known about all of this Flexible whatever. I have not known about Advance payment. I have not known anything. He has not helped me.35

Source: <Save the Children>

14.Citizens Advice explained that the need to pay costs upfront creates a barrier to work. It means “some parents are left facing significant financial challenges as they struggle to bridge the gap” between paying for childcare and reimbursement.36 We heard these problems are compounded by structural features of UC, including:

a)The fact that childcare costs and UC monthly reporting do not always align. A parent might pay upfront for a month’s worth of childcare in the middle of their UC assessment period. They would only receive money back at the end of that assessment period for care that had actually been provided. The remainder would be reimbursed in the following month. This would leave a shortfall at the end of the first month—and parents would potentially have to find more money during the second month to pay for subsequent months.37

b)Wider budgeting problems that UC claimants experience: for example, resulting from the five week wait for an initial UC payment or from difficulty managing the monthly payment.38

Citizens Advice’s frontline advisers reported seeing UC claimants “running up arrears, going into debt, and—in extreme cases—losing both their child’s place in a setting and, subsequently, their job” (see Case study 3).39 Claimants told us that they had got into debt through paying for childcare. For example, Vikki Waterman, a mother of two from Newcastle, said that she had to “beg borrow and steal to make ends meet, and each month I always seem to be playing catch up”.40 Save the Children told us that they had seen parents turn down job offers because “they are simply terrified about getting into debt”.41 The Treasury Committee described the Department’s decision to repay costs in this way under UC as a “fundamental design flaw” that undermines the objective of supporting the lowest-paid parents into work.42

Case study 3: Sinead

Sinead is a lone parent with an 18 month old son. She was moved onto Universal Credit after moving house to a full service area. She earns £126 a week by working 21 hours, topped up by a Universal Credit award of £740 a month.

Since Universal Credit only reimburses costs in arrears, and the nursery requires payment in advance, Sinead has found herself unable to bridge the gap between the two. As a result, Sinead is now in arrears with her childcare costs, and the nursery have informed her that failure to pay the amount will result in her son losing his place.

Source: <Citizens Advice (UCR0268)>

15.Witnesses contrasted the Department’s approach to reimbursing UC claimants for childcare with the way the Tax-Free Childcare (TFC) works.43 Users of that scheme set up an online account which they pay money into, and then use to pay their childcare provider. The Government tops the account up by £2 for every £8 paid in. This means users of TFC receive can financial support from the Government as soon as they start to save for childcare, and before they make any payments to their providers. TFC users, however, will typically be better off than UC claimants, making them better able to afford up-front costs and less likely to experience cash flow problems or fall into debt as a result.44 Steven McIntosh called it a “perversity” that TFC, aimed at wealthier families “provides a gentler process for those families, and therefore supports them not to have cash flow problems from upfront costs”. He concluded that removing upfront costs would be “much more advantageous” to UC claimant households than the current arrangements.45

16.We heard various options for removing or reducing the upfront costs of childcare for UC claimants. We heard some suggestions that the Department should pay childcare costs in advance of the care being provided. This would be similar to arrangements under WTC.46 Save the Children and the Centre for Social Justice suggested the Department could allow claimants to agree with providers the cost of childcare for the month ahead. They would then receive a written bill which could be submitted for reimbursement. Save the Children and the Centre for Social Justice noted that while some providers may be content to wait for payment until the Department pays out, others would demand money straight away. This would mean an upfront cost would remain, although the “time delay in paying/receiving money from DWP [would] be much reduced”.47 Alternatively, Citizens Advice suggested the Department might consider how existing payment systems—such as those underpinning TFC—could be used to deliver payments in advance.48 We also heard suggestions for how parents could be better helped with the initial outlay, which we return to later in this chapter.

Case study 4: Vikki

Vikki is a single mum of two from Newcastle, who is receiving childcare support through Universal Credit. Vikki has recently returned to work, and has struggled with upfront childcare costs. She was forced to borrow money from family members to cover the fees. She says:

I have childcare costs of £700 - £800 a month […] I waited at least three months to start receiving childcare reimbursements and wasn’t able to pay the nursery fees on time, this meant I had late payment fees added on top. It’s impacting on the opportunities I can give my children.

Vikki’s childcare payments have also been inconsistent. She’s seen variations in her childcare payments from Universal Credit of around £500 from month to month. Vikki has also struggled with the complexity of the system, and had issues compiling her evidence. She says:

I’ve submitted the invoice numerous times and been told there’s not enough information. There needs to be breakdowns of the costs, both kids’ names, certain reference numbers, amounts and dates. I’ve had to go back to the Nursery three times to ask them to amend the invoices, costing me an extra £6 on the bus each time. And don’t even get me started on the phone lines...This month alone I’ve spent over 11 hours on hold!

Source: <Save the Children>

17.Alternatively, we heard the Department could pay childcare costs directly to childcare providers.49 This could address the Department’s concerns about fraud and error by ensuring that money designated for childcare goes to childcare providers. It would also help to give those providers certainty of income: something that the childcare sector says is vital given its low profit margins. Jonathan Broadbery, Head of Policy and External Relations at the National Day Nurseries Association, told us that the certainty this would give might enable childcare providers to charge smaller or no upfront deposits to guarantee a place.50 We heard that this option was preferable for claimants because it would remove the need for them to make upfront payments for childcare.51 Consequentially it could reduce the extent to which childcare is a barrier to work and help to ensure that UC achieves its aims.

18.We asked the Department whether it had considered arranging for UC claimants’ childcare costs to be paid directly to providers. The Minister for Family Support, Housing and Child Maintenance, Justin Tomlinson MP (the Minister), told us that a “fundamental principle” of UC is that it aims to help households “get into and progress in sustainable work”. This “includes monthly budgeting for costs such as household bills and childcare”.52 Neither the Minister nor the Department’s written response to our inquiry addressed the point made by our witnesses that the costs of childcare themselves can be a barrier to getting into and progressing in work. We have also heard in a previous inquiry that single household payments in Universal Credit risk exacerbating domestic abuse. Direct payments to providers could mitigate this risk if the reimbursement would otherwise have gone to an abusive or controlling partner.53 The Minister explained that paying childcare providers directly would “require fundamental changes to the [UC] payment system which would need prioritisation (impacting other crucial changes) and would be highly unlikely to be delivered for several years”.54 We heard, however, that UC’s systems already comprise various comparable alternative payment systems: notably the Managed Payment to Landlord option, where some tenants have their rent paid direct to their landlord.55

19.The Department quite reasonably wants to reduce scope for fraud and error within childcare support. But the approach it has chosen is in direct conflict with Universal Credit’s wider objectives. Universal Credit claimants have to pay the considerable costs of childcare upfront, and then wait to be reimbursed. These upfront costs for childcare are not only a disincentive to work: for some Universal Credit claimants they will either make working unaffordable, or force them to take on debt in order to do so. The Department has chosen this approach despite alternative options, such as direct payments to providers, being available. Universal Credit’s system contrasts sharply with Tax Free Childcare, an alternative scheme aimed at better-off parents. Users of that scheme can pay into their accounts before paying for childcare, receive support from Government immediately via a top up, and make payments direct from their account to their provider.

20.We recommend the Department develops Universal Credit’s systems to enable childcare costs to be paid directly to childcare providers. This would alleviate the problem of prohibitive upfront costs, help claimants with budgeting, and give providers themselves much-needed certainty of income. Direct payments would also substantially reduce the risk of fraud and error.

21.The Department says paying costs direct to providers would require changes to Universal Credit’s payment system, which will take some time to make. That does not mean direct payments are not the right thing to do. It does, however, mean that the Department will need to devise an interim solution to help claimants meet their costs and get into work.

Helping claimants with upfront costs

22.The Department told us that it already has provision in place to help claimants who are struggling with the upfront costs of childcare:56

a)The Flexible Support Fund (FSF/the Fund). This is a discretionary fund, allocated by Jobcentre Plus Work Coaches to help the claimants that they support overcome barriers to work. Payments made via the FSF do not have to be paid back by the claimant.

b)Budgeting Advances. These are available to people who have been claiming Universal Credit for at least six months and who can demonstrate low income over that period (below £3,600 for couple, or £2,600 for single parents). Claimants are required to pay them back.57

The Department told us these options would be most helpful when a claimant either moves into work for the first time, or substantially increases their hours.58 This suggests that both the FSF and Budgeting Advances are intended to help with one-off or temporary difficulties with paying for childcare. Citizens Advice pointed out that the Department’s reliance on these measures does not address the longer-term challenges of paying for childcare under UC, such as misalignment between childcare and UC payment schedules.59

Case study 5: Lucy

Lucy is a single mum of two from Manchester, who is receiving childcare support through Universal Credit. Lucy says:

In order to access childcare and go back to work, I’ve had to find a substantial amount of money upfront to put my children into childcare. Being on Universal Credit and needing the support, I don’t have the savings to pay several hundred pounds of nursery fees upfront. I’ve had to borrow money from my parents and take out loans in order to make ends meet and pay those upfront costs.

Difficulty in paying these upfront costs has often resulted in Lucy having to pay her childcare provider late. She also said that she has never been paid her childcare reimbursements from Universal Credit on time, despite always reporting her childcare costs on time, either over the phone or by going into the Jobcentre with receipts. She always has to ring and chase.

Lucy has also struggled with the lack of information and advice on the support available for childcare through Universal Credit. When she first started claiming childcare through Universal Credit she was not made aware of the Flexible Support Fund or any other support to help with upfront costs. Instead she had to rely on borrowing money from family and friends. When she asked at the Jobcentre about support she was given conflicting advice about what the Flexible Support Fund and Budgeting advances could be used for.

Source: <Save the Children>

Budgeting Advances

23.Budgeting Advances are interest free loans. Claimants pay them back to the Department over a maximum of 12 months. To be eligible, claimants must usually have been claiming UC or Jobseeker’s Allowance, Employment and Support Allowance or Income Support for at least six months. They must also have earned less than £2,600 (for single claimants) or £3,600 (for couples) in the last six months, and have paid off any previous Budgeting Advances.60 Witnesses told us that these eligibility criteria prevent some households who might need them for help with childcare from receiving a Budgeting Advance. For example, claimants who have moved in and out of work in the last few months, or those who are already in work but looking to increase their hours, are likely to find that they exceed the earnings threshold.61

24.Our recent inquiry on Universal Support considered the wider issue of claimant debt, and the role that UC can play in creating or exacerbating it. We heard that key parts of the Department’s approach to helping claimants manage the transition to UC rely on them taking on debt: notably in the form of Advance Payments to cover the five week wait for a first payment.62 Citizens Advice and other witnesses told us that this approach can exacerbate existing debt problems. We concluded that the hardship and stress caused by debt can act as a barrier to moving into employment or progressing in work.

When is a loan not a loan?

25.The Department recognises debt can act as a barrier to moving into and progressing in work.63 This may explain why the Minister was at pains to tell us in correspondence that Budgeting Advances are “not a loan but an advance of the claimant’s future UC entitlement”. He specified, however, that they are “interest free [and] repayable over twelve months”.64 It is not clear by what definition this is not a loan. Indeed, the Government’s own website states clearly that “a Budgeting Advance is a loan” which claimants will “need to repay through [their] regular Universal Credit payments” (Figure 1). These payments will be “lower until [they] have paid it back”.65

Figure 1: Information on Budgeting Advances from Gov.uk

Source: < https://www.gov.uk/guidance/universal-credit-advances#get-a-budgeting-advance >

26.Budgeting Advances are one of the options that the Department offers to claimants struggling with the costs of childcare. They are not the solution to this problem. The Minister claims that these payments are “not a loan but an advance” of Universal Credit entitlement. This is untrue. Even the Government’s own website is clear that Budgeting Advances are loans that must be repaid. Claimants who are already struggling with ongoing costs should not be expected or encouraged to take on extra loans and debt in order to deal with them.

27.We recommend the Department amend its guidance to Work Coaches and Universal Credit staff to make clear that Budgeting Advances are not an appropriate option for claimants struggling with the day-to-day costs of childcare. The guidance should make clear that claimants struggling with such costs are to be directed to the Flexible Support Fund in the first instance.

The Flexible Support Fund

28.The Flexible Support Fund can be used to help with the upfront costs of childcare if a claimant’s Work Coach decides that this is necessary to help them accept a job offer or take on more hours.66 Data supplied by the Department up to 2016–17 showed that in the previous four years only a very small proportion of FSF spending has gone towards childcare. The FSF has also been underspent each year (see Table 1, below). The Department could not supply data for 2017–18, which might have given a fuller picture of how the FSF is being used as UC rolls out. It told us that as “updates to [FSF] statistics are not in the public domain”, it would need to release them via publication. When we asked it to do so it declined, saying to do so would incur disproportionate cost.67 It has previously told us in response to questions about other uses of the FSF that it does not systematically collect data or set targets on how it is spent.68

Table 1: Flexible Support Fund spending, millions, 2012–13 to 2016–17

Category

2012–13

2013–14

2014–15

2015–16

2016–2017

Total Budget

£99.9m

£127.6m

£178.8m

£76.8m

£51.7m

- Transport

£13.4m

£19.2m

£20.2m

£15.4m

£13.5m

- Childcare

£1.6m

£1.8m

£1.5m

£1.6m

£1.2m

- Training

£15.5m

£18.6m

£10.6m

£15.2m

£8.4m

- Other

£84.5m

£70.6m

£59.2m

£26.1m

£27.8m

Total

£115.0m

£110.1m

£91.5m

£58.4m

£51.0m

Underspend

- £15.2m

£17.5m

£87.3m

£18.4m

£0.7m

Underspend (%)

- 15.2%

13.7%

48.8%

24.0%

1.4%

Source: Letter from the Minister for Families, Child Support and Housing to the Committee Chair

29.We asked the Department what steps it had taken to promote the use of the FSF to help claimants with childcare costs: both to its own Work Coaches, and to organisations such as childcare providers that UC claimants might speak to if they were struggling with costs. The Minister told us that the FSF is promoted to Work Coaches “via internal communications and via roadshows”.69 The Minister also told us that DWP “has a relationship” with relevant Department for Education teams and with “major national childcare providers, trade associations and sector skills councils”.70 The Minister initially told us the Department “[does] not know” whether the FSF has been discussed as part of this relationship. He later clarified that he is “not aware” of any such discussions having taken place, although as they are “not monitored centrally [the Department] cannot provide further information” on this.71 He ventured that some Jobcentres “may also have close working relationships” with local childcare providers.72

30.We asked witnesses why they thought spending on childcare-related expenses under the FSF has been so low—and why the Fund has historically been underspent. Lucy Collins, a Beauty Technician and claimant of UC childcare support, told us that despite struggling with the costs of childcare, she had found out about the FSF via external support websites for UC claimants—not via her Work Coach. She described it as “the biggest secret in the Jobcentre”.73 Some witnesses therefore suggested that raising awareness of the Fund and its uses amongst claimants might lead to it being better used.74 The Child Poverty Action Group observed that the Department’s efforts to date to promote the FSF to claimants have been limited. It is not mentioned, for example, in the “childcare” section of the Government’s Understanding Universal Credit website, or on the relevant Gov.uk pages.75

31.Dalia Ben-Galim, Director of Advice, Policy and Communications at Gingerbread, a support organisation for single parents, told us that the lack of information Lucy had received on the FSF from her Work Coach was not unusual. Gingerbread had found it was “very common [for claimants] to get little or no information” about the FSF.76 She felt it was not for claimants to research support available to them via the Jobcentre: Work Coaches need to be more consistently knowledgeable about what they can offer claimants, and proactive in offering it. The Centre for Social Justice told us that there is some doubt over whether Work Coaches know that the FSF can be used for childcare expenses. They suggested the FSF is, instead:77

Primarily seen as a fund for small, one-off expenses related to interview or short-course training costs, such as travel, clothing, or childcare to cover time spent at interviews, rather than upfront fees for regular childcare costs.

32.We heard some further suggestions of innovative ways that the FSF could be used to help claimants with the upfront costs of childcare. Gingerbread told us about their proposal for a childcare deposit guarantee scheme—a version of which has been adopted by the Greater London Authority.78 Under this scheme, Government (local or national) directly pays the deposits that are usually required by registered childcare providers. Deposits are then either returned direct to Government when the child leaves childcare, or follow them to their next provider.79 Gingerbread’s Dalia Ben-Galim proposed that the FSF could be used to fund a similar scheme. The FSF would directly pay the deposit to the provider, and it would be returned to the FSF when childcare is no longer needed. Since the deposit would be paid back directly from provider to FSF, she told us that the costs associated with DWP adopting such a scheme would be minimal and risk to the Fund “low”. Importantly, she explained, this approach would transfer risk away from claimants, to the Department.80

33.The Flexible Support Fund helps claimants with costs that prevent them from working, including childcare. It should be invaluable in helping claimants with the upfront costs of childcare. But evidence from the frontline in Jobcentre Plus suggests that it is not well known about by claimants, nor effectively promoted for childcare purposes by Work Coaches. The Department seems to have only a vague understanding of how the Fund is promoted to both its own staff and to stakeholders, including childcare providers. We recommend the Department set out in response to this report its strategy for promoting the use of the Flexible Support Fund to help with upfront childcare costs to Work Coaches, claimants, and other interested parties such as childcare providers. This should include details of any mandatory or optional training or development taken on by Work Coaches and other JCP staff and managers.

34.The Department relies on the Flexible Support Fund to help claimants with a multitude of barriers to work. But its limited data shows the Fund has been underspent in every year since 2012–13. Moreover, the proportion spent on childcare is minute. The Department does not consistently gather and publish data on usage of the Fund. It refused, for example, to supply us with any data for 2017–18, a period coinciding with the acceleration of the Universal Credit roll-out. The failure to gather data means the Department cannot verify that the Fund is fulfilling its intended purposes. And it should not expect claimants, or the organisations supporting them, to take on trust that the Fund will meet their needs. We recommend the Department publish a quarterly statistical update on the use of the Flexible Support Fund. This should include breakdowns of both the purposes for which the Fund is used, and differences in spending by Jobcentre Plus district.

35.DWP should be open to using the Flexible Support Fund in innovative ways to help parents to work, and minimising the financial risks those claimants face. We recommend the Department trial a childcare deposit scheme using the Flexible Support Fund. This would involve paying deposits direct to providers from the Fund. The Department should see this as an opportunity to pilot paying costs direct to providers. We therefore recommend it commission and publish an evaluation of the trial that includes lessons learned for further direct payments to childcare providers.

Childcare “top up” fees

36.UC claimants may be able to receive help with their childcare costs beyond that offered within UC. From September 2017, households where at least one parent or carer is in work and earning the equivalent of National Living Wage/National Minimum Wage for 16 hours per week can claim 30 hours free childcare (1,140 hours per year) for children aged 3 or 4 years old. The free hours can be claimed at the same time as UC Childcare.81 The scheme is the responsibility of the Department for Education.

37.The costs that claimants can incur paying for childcare are not limited to deposits and the cost of the childcare itself. The Treasury Committee’s inquiry into Childcare heard that the introduction of the 30 “free hours” policy is leading to some parents facing additional costs. Provider organisations including the National Day Nurseries Association, the Pre-School Learning Association and the Professional Association for Childcare and Early Years told the Treasury Committee’s inquiry that the level of funding provided by the Department for Education for 30 free hours was insufficient to cover providers’ costs.82 Providers were taking steps to make up the shortfall, including:

The Department confirmed that “top up” fees cannot be reimbursed under Universal Credit, and that parents and carers who are in work cannot receive additional support from the Flexible Support Fund.83

38.Deposits and childcare hours are not the only upfront childcare costs that parents and carers face. There is some evidence of unintended consequences from the Department for Education’s (DfE) 30 hours provision for three and four-year olds. In attempting to offset funding shortfalls, childcare providers are charging for “top ups” such as food or activities, restricting the availability of free hours, or reducing the quality of care. The 30 hours can be claimed alongside Universal Credit—and by households earning up to £200,000. Better-off parents may opt to pay the top-ups or find a provider offering higher quality childcare. But the poorest households could find they have little choice but to accept lower quality, less convenient care; or even that the additional costs are prohibitive. “Top up” costs cannot be reimbursed under Universal Credit or the Flexible Support Fund if claimants are in work. And it is questionable whether DWP should, in the long-term, pick up costs resulting from DfE’s policy. We intend to take further evidence on this issue.


19 The precise offer with regard to free hours varies in Wales and Scotland: see C. Harding and J. Cottell, Childcare survey 2018, p.10 for full details.

20 Gingerbread’s Dalia Ben-Galim emphasised that claimants they had support were required to submit receipts for payments made, rather than invoices for payments due. See Q815–817 (Dalia Ben-Galim).

21 Gov.uk, Universal Credit and childcare, December 2018

22 Claimants with three or more children in UC areas, however, are permitted to make new claims for WTC up until February 2019. See Gov.uk, Tax credits and childcare, December 2018

23 Gov.uk, Tax Free Childcare, December 2018

24 Gov.uk, 30 hours free childcare, December 2018

27 DWP (UCR0267)

28 Centre for Social Justice (CSJ) and Save the Children (StC), A bright start: improving childcare for disadvantaged families through Universal Credit, November 2018, p.45

30 DWP (UCR0267)

32 Ibid.

33 Citizens Advice (UCR0268)

34 Q821 (Steven McIntosh)

35 Q886

36 Citizens Advice (UCR0268)

37 Citizens Advice (UCR0268), Centre for Social Justice (UCR0266), CPAG (UCR0202)

38 See Work and Pensions Committee, Universal Credit: the six week wait, First report of session 2017–19, HC 336, October 2017 and Work and Pensions Committee, Universal Support, Eighteenth report of session 2017–19, HC 1667, October 2018

39 Citizens Advice (UCR0268)

40 Q909

41 Q821 (Steven McIntosh)

42 Treasury Committee, Childcare, Ninth report of session 2017–19, HC 757, March 2017, p.14

43 Q829 (Steven McIntosh), Q823 (Jonathan Broadbery), Q828 (Dalia Ben-Galim), Citizens Advice (UCR0268)

44 To be eligible for TFC, people must earn at least £125 per week up to a ceiling of £100,000 per year. Couples can earn up to £100,000 per year each.

45 Q829 (Steven McIntosh)

46 Citizens Advice (UCR0268), Highland Council (UCR0185)

49 Highland Council (UCR0185), Citizens Advice (UCR0268), Save the Children (UCR0257)

50 Q823 (Jonathan Broadbery)

51 Highland Council (UCR0185), Citizens Advice (UCR0268), Save the Children (UCR0257)

53 Work and Pensions Committee, Universal Credit and domestic abuse, Seventeenth Report of Session 2017–19, HC 1166, August 2018

55 Q823–824 (Jonathan Broadbery), Fran Bennett (UCR0222)

56 DWP (UCR0267)

57 Gov.uk, Budgeting loans, December 2018

58 DWP (UCR0267)

59 Citizens Advice, The practicalities of childcare: an overlooked part of the puzzle, 2014. See also: Save the Children (UCR0257)

60 See Gov.uk, Universal Credit advances, December 2018, December 2018. This does not include new claim Advances. All new UC claimants are entitled to receive a new claim Advance of up to 100% of their expected UC award when they open a claim for the benefit.

61 Child Poverty Action Group (UCR0263), Joseph Rowntree Foundation (UCR0258), Save the Children (UCR0257)

62 Work and Pensions Committee, Universal Support. Take up of new claim Advance payments stood at t 60% as of June 2018. See Letter from Minister for Employment to Committee Chair, June 2018

65 Gov.uk, Universal Credit advances, December 2018

66 See S. Kennedy, T. McGuinness and A. Jones, Jobcentre Plus Flexible Support Fund, House of Commons Library briefing, October 2016

68 See Work and Pensions Committee, The Future of Jobcentre Plus, Second Report of Session 2016–17, HC 57, November 2017, p.22

73 Q876 (Lucy Collins)

74 Centre for Social Justice (UCR0266), Child Poverty Action Group (UCR0263), Joseph Rowntree Foundation (UCR0258)

75 Child Poverty Action Group (UCR0263), DWP, Understanding Universal Credit, December 2018

76 Q849 (Dalia Ben-Galim). See also Centre for Social Justice (UCR0266), Child Poverty Action Group (UCR0263), Centre for Social Justice (UCR0266)

77 Centre for Social Justice (UCR0266), Q848 (Joe Shalam)

78 Q827 (Dalia Ben-Galim)

80 Q827 (Dalia Ben-Galim)

81 Gov.uk, 30 free hours childcare, December 2018

82 Treasury Committee, Childcare, pp.30–32

83 DWP (UCR0279)




Published: 23 December 2018