Budget changes to childcare should be extended to all of Universal Credit

by David Hilferty, CAS Strategic Lead on social justice policy. This article was first published in the Herald on 25 March 2023.

First day at nursery is a nerve-wracking experience for all involved. As you pack your little person off with enough provisions to last a fortnight, it is completely natural for stress levels to be high – worries about how they will settle in when they get there; worries about what they will bring home on their return. 

For parents in receipt of Universal Credit (UC), however, that trepidation extends beyond the separation anxiety and the litany of bugs and viruses that will inevitably ensue. Until last week’s Budget, people on UC were entitled to support with up to 85% of childcare costs, but crucially they had to pay upfront first. When childcare costs are already often extortionate, the wait to be paid back in arrears acts as a significant – and at times even insurmountable – barrier to getting back to work.  

That’s why we welcomed the change announced in the Budget statement last week to allow people on UC to receive cash support upfront. Lack of affordable childcare is a key contributor to poverty and inequality. This impacts on women especially, and its effect is not just temporary or transient. Analysis from the Social Market Foundation shows that leaving the labour market has a “long-term, scarring effect on wages.”  

With that in mind, we believe the switch to upfront support for people receiving UC will support some parents to return to work, should they choose to do so.  

Yet as this wrong was put right, it only served to magnify the design defect at the very centre of the social security safety net.  

When first applying for UC, you have the option of waiting five weeks for a first payment, or taking an upfront loan that is then clawed back across your future payments. For many people this is no choice at all, and they face a double jeopardy of being penalised at precisely the point when help is needed most.  

With this precedent set on childcare for upfront support, this principle should be extended to other parts of the UC system – there is now no excuse for the five-week wait to remain.  

The existing design of the system sets people up to fail, throwing them into an intractable cycle of debt. Half of households in Scotland who receive UC lose an average of £59 per month in deductions. That’s taking money away from people who can least afford it, at a time when they need it most. And it’s money that shouldn’t even have to be paid back in the first place. Current levels of support are already well below what people need to meet basic and essential needs – reducing this still further is inexcusable.   

With Budget statements, it is often said that the devil is in the detail, and we need to wait a few days for the full repercussions to become clear. For people on UC, the repercussions are clear from the outset, but the wait is much longer. Upfront cash support must be the standard across the board, rather than an exception in limited circumstances. People need help now – there is simply no time to wait.   


Print Friendly, PDF & Email

Leave a Comment

Your email address will not be published. Required fields are marked *