For the first time, families who work less than 16 hours a week will be able to claim support for up to 70 per cent of their childcare costs - up to £123 a week for one child, or £210 a week for two children - when the Universal Credit is introduced in 2013.
The Government said that around 80,000 families would benefit from an extra £300m invested into the Universal Credit on top of £2 billion already in the system.
Ministers said that the plan would mean that, for example, a lone parent working ten hours a week on the minimum wage would be around £40 a week better off in work than on benefits, because under Universal Credit they would be eligible for support with childcare costs.
Limits will be applied monthly, so that parents who work shifts or have fluctuating work patterns will not lose out and will have more flexibility to manage the cost of childcare, by rolling over unused credit up to the limit, from week to week. However, the details of how this will be administered to ensure that parents do not end up with overpayments has not yet been set out.
Mr Duncan Smith said, ‘We are determined to help more parents take their first steps into work, but under the current minimum hours rule parents are trapped in state dependency without the childcare support they badly need - providing yet another barrier to work.
‘Under Universal Credit more people will receive support for childcare than they do now. Parents will be able to work the hours to suit their families and receive the childcare support they deserve. We will target support at those making the first steps into work – support won’t just be available for those working more than 16 hours, it will also be there for those working fewer than 16 hours.’
There had been fears that more families would lose out as a result of moving support for childcare to the Universal Credit, because the Government had previously said it would not increase the amount that it spends on childcare support, and more of them would be eligible.
Call for reinstatement of 80 per cent limit for support for childcare costs
A group of ten poverty and family organisations - including the Daycare Trust, the Child Poverty Action Group and Save the Children UK - welcomed the plans but called for an increase for the reinstatement of the 80 per cent limit for support with childcare costs.
In a joint statement they said, ‘Today’s announcement of an extra £300m for help with childcare shows that the Government has listened to the concerns of parents across the country who are struggling with rising childcare costs. Offering childcare support to an additional 80,000 families will help parents to move in to work, which is the best way for them to lift their families out of poverty.
Adequate help with childcare is fundamental to the success of the Government’s welfare reforms, and ministers’ willingness to change their proposals in the face of strong evidence is to be welcomed.’
‘This announcement means that most parents will receive no less childcare support under Universal Credit than they do under Tax Credits today. However, it still amounts to a significant reduction in support for the poorest families who currently receive 95.5 per cent of their childcare costs through Housing Benefit. In future budgets, we would like to see further incentives for parents to work with an increase in the proportion of childcare costs covered, starting with an increase to 80 per cent as soon as possible.’
Anne Longfield, chief executive of 4Children, said, ‘We know from talking to families that, particularly when children are young, working a small number of hours can be a good way to make the transition from benefits into work.
‘This announcement clearly fits the Government’s new "family test" and we hope to see many more in the future.’
She added, ‘However, finding 30 per cent of the cost of childcare can be extremely difficult for families who face rising prices and incomes falling in real terms. We know that the reduction in support from 80 per cent to 70 per cent this year has hit many families hard. Therefore we will continue to argue that the percentage of childcare costs funded by Government should rise, back to 80 per cent as soon as possible.’
The Pre-School Learning Alliance said that any help for families on low incomes with paying for childcare is welcome.
Chief executive Neil Leitch said, 'We are well aware that the cost of childcare in teh UK remains among the highest in Europe, so we wait to see what this elemnt of teh Universal Credit will have on chidlcare take-up.'
Ian Mulheirn, director of the thinktank the Social Market Foundation, said, 'With childcare costs rising, any measures to help parents access good quality childcare are welcome. Extending the current deal to parents working less than 16 hours will make it easier for parents to take gradual steps back into work.
'But this is not new money that the Government has conjured up. The £300m to fund the extension has been found from elsewhere in the Universal Credit pot, so will take funds away from the same group of people - families on low and middle incomes. Supporting childcare is necessary and makes good politics, but rather than robbing Peter to pay Paul, DWP is essentially robbing Paul to pay Paul - albeit in a more politically attractive incarnation.'
Labour dismissed the Government’s plans, saying that the extra money was from existing Universal Credit funding and did not make up for cutting entitlements to childcare support from 80 per cent to 70 per cent.
'Smoke and mirrors'
Shadow minister for work and pensions Liam Byrne said, ‘Today’s announcement is frankly smoke and mirrors. It won’t mean a penny more help for parents already struggling on childcare tax credits.
‘Universal Credit is now set to lock in a "parents’ penalty" that cuts back childcare payments so hard that many parents will be forced to give up work. With parents struggling to make ends meet, it beggars belief that the Tories are stopping parents working the hours and shifts they need by taking away their childcare.’
