From the TUC

Childcare and Universal Credit

27 Sep 2011, by Guest in Society & Welfare

The Government wants to make work pay and ensure work is a route out of poverty for families but many low income families are trapped; they can’t afford to work but they can’t afford not to work.

According to research by Save the Children and Daycare Trust, the recent cut in the amount of support parents can get towards childcare costs through Working Tax Credit is pricing parents out of work. Parents in low paid jobs are particularly affected, with 41% of parents earning less than £12,000 affected by the cut saying they would consider giving up work.

This is based on the findings of a survey of over 4000 parents carried out by Save the Children Daycare Trust (as I reported on this blog in May). The survey looked at the impact of childcare costs on families and the work prospects of parents in the UK.

The results published in “Making work pay – the childcare trap” show that the rising costs of living coupled with stagnant wage increases and spiralling childcare costs is having a big impact on the quality of family life, especially for the poorest families. One of the major reasons for this has been the government’s decision to reduce childcare support through Working Tax Credit from 80% to 70%, resulting in an average of £560 being added to the bill of low to middle income working families.

There is a growing evidence base that childcare costs are having significant impact on whether work really pays for parents. The survey also found that:

  • A quarter of parents with incomes less than £12,000 have given up work and a third have turned down a job mainly because of high childcare costs – more than twice as likely as better off parents.
  • Of those parents with incomes below £12,000 and currently in paid employment the majority (80%) agreed with the statement  “Once I have paid for childcare, I am in a similar position to as if I was not working”.
  • The majority of parents with incomes below £12,000 (61%) said they were struggling to pay for childcare compared to around a third of parents on higher incomes (37%).
  • 26% of parents with incomes below £12,000 have been unable to take up education or training because of high childcare costs.
  • 63% of parents, regardless of income, say they can’t afford not to work but struggle to pay for childcare
  •  A quarter of parents, regardless of incomes, said the cost of childcare has caused them to get into debt.

The findings come at a time when the Government’s attempt to ‘make work pay’ through the introduction on Universal Credit (which will replace out-of-work benefits and tax credits from 2013 onwards) is being undermined by a lack of funding for support with childcare costs. The Government wants to transfer the existing, recently cut, childcare funding over to the new Universal Credit system but spread the money over a greater number of parents. It is crucial that the Government finds the extra money needed to ensure that parents receive support with up to at least 80% of childcare costs (up to current weekly maximums) so that work stacks up for low to middle income families.

Take action now with Save the Children’s Affordable Childcare campaign.

GUEST POST: Graham Whitham is the UK Poverty Policy Advisor at Save the Children, leading on policy and research work into child poverty and family finances. Save the Children works in more than 120 countries. We save children’s lives. We fight for their rights. We help them fulfil their potential. In the UK Save the Children are a leading member of the End Child Poverty Coalition and believe no child should have their childhood experiences or life chances damaged by living in poverty.
TUC