Working parents who claim Universal Credit will get more help to pay for childcare costs from Wednesday, June 28, the Department of Work and Pensions has confirmed.
The package of changes for working parents, which were announced by Chancellor Jeremy Hunt in the Spring Budget, mean that the DWP is set to start paying childcare costs up front from next month, as well as increasing the amount that parents can claim back for their childcare costs to £951 for one child and £1,630 for two or more children.
The changes are a key part of the Government’s drive to reduce economic inactivity announced in March's 'back to work' budget. Around £3.5bn will be invested over five years to help as many people as possible into work in order to grow the economy.
Read more: How to claim tax-free childcare for your children as thousands missing out on up to £2,000 a year
The new limit for childcare costs is a rise of 47% from the previous limits of £646 for one child or £1,108 for two or more children and is the biggest ever expansion to childcare provision, worth a total of £900m. There are around 5.8 million people who claim Universal Credit, and 40% of those are in employment.
At the same time, many parents will get help from the DWP immediately with their first childcare bill. Currently, those who work and have their wages topped up by Universal Credit are eligible to claim up to 85% of their childcare costs back from the Government, but the costs have to be paid upfront and parents then have to claim a refund. With average full-time nursery fees costs running at around £263 per week and £228 for a childminder, according to the National Childbirth Trust (NCT), parents can struggle to return to work as they have to find the first month's fees in advance before getting any support.
Under the changes, the DWP will help eligible parents cover the costs for the first month’s childcare when they enter work or significantly increase their hours. Described by the DWP as "one of the most significant barriers to parents working and helping to grow the economy", charities had previously warned the current scheme of paying and claiming a refund risks people getting into debt. Parents will also receive up to 85% of their childcare costs back before their next month’s bills are due – meaning they should have money to pay one month in advance going forward.
Mel Stride, Secretary of State for Work and Pensions, said: “These changes will help thousands of parents progress their career without compromising the quality of the care that their children receive. “By helping more parents to re-enter and progress in work, we will be able to cut inactivity and help grow the economy.”
The Department for Education is also launching a consultation to boost the early years workforce and remove unnecessary burdens that the childcare sector face in preparation for the expansion to free childcare from next year. From April 2024, working parents will be able to access 15 free hours for two-year-olds, which will be expanded to 15 free hours from nine months to the start of school from September 2024, rising to 30 free hours from September 2025.
From September, the hourly rates paid to providers to deliver free childcare for two-year-olds will increase by 30% from an average rate of £6 to £8. This represents a significant increase in funding for early years.
Government will also launch a new recruitment campaign early next year and consider how to introduce new accelerated apprenticeship and degree apprenticeship routes so everyone from junior staff to senior leaders can move into a career in the sector.
Claire Coutinho, Minister for Children, Families and Wellbeing, said: “Childcare shouldn’t be a barrier to work, but the expense has previously meant parents have had to choose between working or looking after their child. “We are supporting families with the largest ever expansion of free childcare, making sure that places will be available for parents who need them. This will save a working parent using 30 hours a week an average of £6,500. We have already announced plans to boost the amount Government pays childcare providers, and now we’re knocking down barriers to recruiting and retaining the talented staff that provide such wonderful care for our children.”
According to the Organisation for Economic Cooperation and Development (OECD), the cost of childcare in the UK is among the most expensive in the world, taking up on average nearly 30% of the income of a couple with two young children. Family and childcare support group Coram, which carries out a childcare survey every year, said many families across the country struggled to work and afford childcare, along with other rising bills.
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