Parents claiming the universal credit benefit should have their childcare costs reimbursed directly to nurseries to ease financial strain, a committee of MPs has recommended.
In a report, the Commons work and pensions committee described the current system, in which parents pay childcare fees up front and are then reimbursed, as a barrier to working for many single parents.
The report, which focuses on changes to childcare payments, is the latest of several that examine the problems thrown up by universal credit, which is gradually replacing six “legacy” benefits. There has been widespread criticism of the new system, which critics charge drives some claimants into debt and leaves others with too little income to cover basic expenses.
Under the new childcare arrangements, claimants can be left paying bills that sometimes run into thousands of pounds and then have to wait weeks or even months for the DWP to reimburse its share, which can be up to 85 per cent of the total cost.
Thuto Mali, one of the single parents who gave evidence to the committee, said she was forced to turn down a £32,000-a-year job because paying the monthly £1,500 childcare fees up front, as well as finding a £500 deposit, would have been impossible.
Frank Field, the independent MP who chairs the committee, said if the government had set out to design a system to make it harder for parents to get into work, it could hardly have done better than the UC system.
“It’s not just driving parents into despair and debt and creating problems for childcare providers,” Mr Field said. “It’s also actively working to prevent the government achieving its own aim of getting more people into work.”
The report also called on the DWP to stop recommending that people struggling to meet childcare costs should take out a “budgeting advance”, which the committee said was being misrepresented to claimants as an advance on future UC payments, whereas it was in fact a loan.
“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,” the report said.
The MPs said the DWP should instead encourage staff to use money from the Flexible Support Fund, which can be used to help people who take up a job offer or take on more hours. They pointed out that very little of the fund was spent on childcare and money was often left over at the end of the year.
The DWP said that universal credit reimbursed claimants for up to 85 per cent of their childcare costs, which is more generous than the 70 per cent maximum under Child Tax Credits, which it is replacing.
“Universal credit is a force for good for many and people are getting into work faster and staying in work longer,” the department said.