Written evidence from Department for Work and Pensions (UCR0267)

 

Q1. How does access to childcare support under Universal Credit compare to the legacy system and the new Tax-Free Childcare system?

 

  1. Universal Credit (UC) is fundamentally different to tax credits and includes a wide-range of extra support not offered under the legacy system. UC offers more generous childcare provision, in-work progression support and none of the cliff edges that exist in Tax Credits. 

 

  1. In UC, parents who work can receive up to 85% of their eligible childcare costs up to a maximum of £646.35 per month for one child or £1,108.04 per month for two or more children. Unlike WTC, childcare costs in UC can be paid regardless of the number of hours a claimant works. If claimants have a firm job offer, they can claim childcare costs before the job starts and help with up-front fees or deposits may also be available which can help establish a routine.

 

  1. Childcare in UC is designed to avoid the high levels of fraud and error inherent in the Tax Credits system which often resulted in overpayments and difficulty verifying childcare providers etc. Additionally, UC childcare provides greater accuracy and flexibility because each payment is based on the actual amount people spend on childcare.

 

  1. UC childcare support is more holistic and generous, and the rules less restrictive, than in the legacy system. It supports the wider government childcare offer, which includes free childcare hours and tax-free childcare, meaning reasonable childcare costs do not form a barrier to work.

 

  1. The DWP has increased investment in childcare and expects to spend around £300m more than legacy (known as the marginal cost of childcare) on the UC childcare cost element.

 

  1. Childcare costs can also be claimed for at least a month after employment ends which helps maintain childcare consistency as claimants move between jobs. When childcare costs are provided through UC, the amount of the childcare costs element is disregarded from the benefit cap.

 

  1. Eligible UC claimants can claim 15 or 30 hours of free childcare for their 2-4 year olds as well as UC’s childcare cost element for any additional hours they may choose to work.

 

  1. In the legacy system of working tax credits (WTC) parents who work at least 16 hours receive help with up to 70% of eligible childcare costs up to a maximum of  £122.50 a week for one child or £210 for two or more children. Those claimants working less than 16 hours per week (i.e. those on Income Support) can apply for help with childcare costs through the discretionary Flexible Support Fund up to a limit of £87.50 per week for one child and £150 per week for two or more children.

 

  1.                  Tax-Free Childcare (TFC), administered by HMRC, is available for parents earning the equivalent of 16 hours per week at the National Minimum Wage, whether employed or self-employed. For every £8 working parents pay into their online childcare account, the Government will pay in £2. This is worth up to £2,000 per child per year for children aged under 12 and up to £4,000 for disabled children under 17. Parents can then use the money to pay for approved childcare. TFC and UC’s childcare cost element cannot be claimed at the same time.

 

  1. Analysis of the impact of TFC on working parents will need to take place once the scheme has had time to bed in and parental awareness has increased, allowing families to understand the support they can receive under the scheme. This is why the government has committed to carry out a post-implementation review of TFC two years after it was implemented.

 

 

Q2. Is the available support sufficient to cover locally available childcare costs? Does it reflect actual childcare costs and if not, how should it be updated?

 

  1.             Support with eligible childcare costs is based on monthly reporting of the actual childcare costs a household incurs. Any reasonable costs paid to a provider which enables that claimant to work, begin work or increase working hours can be considered with up to 85% of these costs allowed up to the childcare cost maximum limit.

 

  1.             UC’s childcare costs offer is structured in this way to be intentionally flexible as we recognise that costs vary between areas and are dependent on a number of factors, such as the availability of providers.

 

 

Q3. How do upfront payments and the structure of reimbursements under UC affect low-income parents, including in their decisions to access childcare and take up work?

 

  1. We understand that in the month that claimants start work or substantially increase their working hours they may be unable to pay up-front childcare costs. To enable the claimant to take up the job offer or increase their working hours, they may be eligible to receive a budgeting advance. This is not a loan but an advance of the claimant’s future UC entitlement. Their work coach will make sure that this interest free advance, repayable over twelve months, is manageable.

 

  1. For claimants ineligible to receive a budgeting advance the Flexible Support Fund may offer assistance. The Flexible Support Fund gives decision makers discretion to decide how to help claimants in financial need to move into work, for example by helping them to meet their upfront childcare costs so that they can accept offers of work.

 

  1. UC continues to pay childcare costs for an existing childcare place whilst a claimant is receiving statutory sick pay, statutory maternity pay, ordinary statutory paternity pay, additional statutory paternity pay, shared parental pay, statutory adoption pay, or maternity allowance.

 

  1. Childcare costs may also cover the time to travel to and from the provider, or costs where childcare providers will only provide specific session times.

 

  1. Additionally, in response to claimant feedback on the reimbursement process, we recently made it even easier to claim childcare costs via Universal Credit with the introduction of a digital facility to provide evidence of childcare costs where needed. Previously this had to be provided via post or in person so the burden on the claimant has been eased considerably.

 

 

Q4. How is monthly reporting and assessment working in practice and how could it be improved?

 

  1.             Support with eligible childcare costs is based on monthly reporting of the actual childcare costs a household incurs. Claimants are then reimbursed for their eligible costs within their UC award. Childcare costs can be claimed up to 3 months in advance, but will be reimbursed in the month the childcare is actually provided.

 

  1.             Late reported childcare costs are costs that have been paid in a previous assessment period but the claimant only reports them in the current assessment period or costs where evidence has been supplied outside the one month. Late costs must be referred to a decision maker to decide whether to accept them or not. 

 

  1. The Universal Credit full service system for childcare reporting is easy to use and enables claimants to report their childcare costs online by inputting details of the childcare provider, cost of the childcare and relevant date information. 

 

  1.             To ease the burden on claimants, we don’t always ask for evidence after reporting of childcare costs – particularly where a claimant is working regular hours and has stable childcare costs.

 

  1. A new feature that allows claimants to digitally upload receipts/evidence of their childcare costs from almost any device was introduced in February 2018. Recognising that this may not suit everybody, claimants are still able to choose to provide requested evidence to verify childcare costs either in person at a Jobcentre or by post.

 

  1. Internal data gathered soon after introduction of the feature suggested that the vast majority of claimants are now choosing to upload proof of their childcare costs online rather than booking an appointment to bring them in to a Jobcentre or post them to a Service Centre. Importantly, of those only a small percentage are asked by their Case Manager to provide further evidence. This suggests that most claimants that upload evidence are not seeing any problems, despite this being a relatively new feature.

 

  1. UC is designed to mirror the way most people in work are paid, which is monthly. Our latest published data shows that around 80% of new claimants are being paid in full and on time. If there are delays in making the first payment, this can be due to outstanding verification issues, such as proving bank statements or proof of rents. It can also be due to a claimant not having signed their claimant commitment.

 

 

Q5. Are existing sources of support—including the Flexible Support Fund and budgeting advances—available to low income parents faced with upfront childcare costs adequate? If not, why not?

 

  1.             Where a UC claimant is unable to pay for upfront childcare costs in the month that they start work or increase their working hours while on UC, budgeting advances are available to help them with this.

 

  1.             The 6 month eligibility criteria for budgeting advances is waived if the purpose of the advance is to obtain or retain employment but the earnings of the claimant (and partner if applicable) must not exceed the prescribed threshold of £2,500 for a couple or £1,500 for a single claimant within the last six complete assessment periods.  The maximum amounts are also prescribed, which are £348 for a single person, £464 for a couple or £812 for households with dependent children.  

 

  1.             For claimants ineligible to receive a budgeting advance or for those in particularly difficult financial circumstances, the Flexible Support Fund may be able to help with childcare costs.

 

  1.             The Flexible Support Fund is a locally managed limited fund to remove barriers to work, giving decision makers discretion to decide how to help claimants to move into work, including helping them to meet their upfront childcare costs so that they can accept offers of work. Claimants do not need to pay this back.

 

 

Q6. Are claimants made aware of the support made available to them and are work coaches adequately trained to give appropriate guidance on this issue?

 

  1.             Government departments with responsibility for childcare work very closely together to help improve awareness of the Government’s childcare offers. The Childcare Choices website has been developed for parents, including UC claimants, to encourage understanding of the options available to them and to help them determine which ones may be most appropriate for their circumstances.

 

  1.             A key priority for the Government is to remove barriers to work and to support parents to enter sustained employment. Clear information is published on GOV.UK about the help available to pay for childcare. Childcare messaging is a key element of the external-facing ‘Understanding Universal Credit: Opening Up Work’ campaign and there is further information published on the Understanding Universal Credit website, with links to the Childcare Choices website where appropriate.

 

  1.             Work coaches in Jobcentres are fully trained and provided with detailed guidance about the help available for claimants to pay for childcare in Universal Credit. Additionally, more work is currently being done to increase understanding of the Government’s childcare offer via an internal communications campaign with Jobcentre and service centre staff.

 

 

Q7. How could the Government improve the system for supporting low-income parents’ access to support for childcare under Universal Credit?

 

  1. The below graph uses the March 2018 UC Full Service data (those in receipt of UC childcare) to demonstrate how lower income UC claimants are currently taking up the UC childcare compared with the steady state forecast (as outlined as part of spring statement 2018). The graph indicates that the policy is helping those on lower incomes. 

 

  1. The graph shows UC is being taken up by low earners. Data only allows a comparison with our fully rolled out forecasts, which naturally have compositional differences, so some caution should be taken in making direct comparisons.

 

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  1. The Department will continue to work closely with other Government departments and to focus on internal communications to drive up awareness and understanding of the Government childcare offers and the UC childcare cost element.

 

  1. As part of UC’s ‘Test and Learn’ approach, we will continue to listen to claimants, engage with the sector, and work with our operations colleagues to measure effectiveness and consider further improvements.

 

October 2018