A court case being brought by a single mother against the Department for Work and Pensions (DWP) has the potential to help thousands of parents on Universal Credit (UC) if she wins her legal battle.
Single parent Nichola Salvato is asking for a judicial review of rules that force UC claimants to pay up-front for childcare.
National Day Nurseries Association (NDNA), the Professional Association for Childcare and Early Years (PACEY), and other early years organisations including Save the Children have submitted supporting evidence for the case, which is being handled by Leigh Day Solicitors.
Parents on UC can get up to £646 per month in Tax Credits for each child under 16 to fund 85 per cent of their childcare costs. But they must pay up-front and claim the costs back later, which leaves some facing four-figure bills.
The DWP says the policy is to prevent fraud.
Faced with a ‘£1,700 bill’
Ms Salvato, a benefits advisor, was forced to cut her hours and borrow £2,000 from payday lenders and family to cope with childcare costs, because she couldn’t get extra DWP help to meet an advance payment. This was because she had earned more than £2,600 in six months.
Ms Salvato claimed she would have been faced with a £1,700 bill in one month if she had not cut her hours.
Jonathan Broadbery, head of policy and external relations at NDNA, said: ‘Many of our member nurseries have raised concerns with us about their parents struggling to make childcare payments because of delays or refused claims of Universal Credit.
‘This can cause real cash flow problems for nurseries and also cases where parents can’t find upfront payments for places.
‘NDNA has made recommendations to the Work and Pensions Committee to make up front payments to providers on behalf of parents on Universal Credit so they can be sure of a place for their child removing a potential barrier to returning to work. This will also help providers to be able to plan for new intakes.’
At PACEY, chief executive Liz Bayram says her organisation decided to support the legal challenge because – 'We know anecdotally that Universal Credit’s requirement that claimants are reimbursed for the cost of their childcare place means many vulnerable families, especially single parents, are put in an impossible position.
'No registered childcare providers wants to turn a family in need of childcare away but equally registered providers are struggling to cover the cost of delivering a childcare place, especially with such low levels of government funding for early education entitlements. This means the only way they can offer support to families and remain sustainable is to require a deposit for each place they provide to a family and/or a month’s advanced payment for the childcare place. This can be as much as £1000 and, when families like Nichola have to take out loans to secure a place or reduce their working hours, clearly the system isn’t working.'
End of benefit freeze in sight
The end to the benefit freeze would mean Universal Credit and other working age benefits rising by 1.7 per cent from April 2020.
The freeze was brought in by the Conservatives and came into effect from April 2016. It has meant that most benefits and tax credits have not gone up in line with inflation for four years.
Other benefits that have been frozen but are now set to rise are Employment and Support Allowance (ESA), income support, housing benefit, child tax credits, working tax credits and child benefit.
The increase means someone on £1,000 a month in benefits will get an extra £17, equivalent to £204 over a year. Those receiving £500 a month get an extra £8.50.
But according to think-tank the Resolution Foundation, families will still be hundreds of pounds a year worse off due to the past five years of bills rising while benefits have remained at the same level.
It says that while the benefit freeze is over, its impact is here to stay with a lower income couple with children £580 a year worse off as a result.