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High childcare costs are stopping parents working longer

Rebecca Goodman
Written By:
Rebecca Goodman

Parents who receive Universal Credit are being held “prisoners to the high cost of childcare”, a group of MPs has warned.

The report says that those parents aren’t able to increase the hours they work because the childcare support available for them only covers part-time hours.

The system is stopping parents receiving the benefit from working longer, according to the report published today from the Work and Pensions Committee.

It says many problems that exist in the childcare system today were highlighted in a 2018 report. It notes that because nothing has been updated, the government’s ambition to help those receiving UC to work longer is being hindered.

Rt Hon Sir Stephen Timms MP, chair of the Work and Pensions Committee, said: “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.”

It comes as reports warn parents may face higher fees as providers struggle to fill a funding gap of 8% by 2024.

Expensive childcare costs

One of the main barriers for parents is the high cost of childcare. UK parents pay the highest fees out of any developed country, according to the OECD. Some pay 65% of their wages on childcare costs.

For those receiving UC, the maximum support available which has been frozen since 2016 has not kept up with inflation, which is currently at 10.7%.

Parents receiving Universal Credit can receive 85% of a £760 monthly childcare bill which covers around 27 hours a week of work. But this cap of £760 has been in place since 2005 and MPs say it is “long overdue” a reassessment and needs to reflect prices paid in 2022.

Childcare fees paid upfront while benefits paid in arrears

The report also highlights the issue of childcare fees being required upfront while UC is paid in arrears.

It suggests a direct payment system is introduced because the current system means parents have to wait weeks until they are reimbursed and are often pushed into debt to meet upfront costs.

If a solution isn’t found, the group says childcare support needs to be removed entirely from the UC system.

It has also recommended more guidance for parents to help them understand the different childcare support options available to them and proposes a consultation with providers.

Many parents are ‘prisoners to the high cost of childcare‘

Sir Timms added: “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.”