From the TUC

End childcare inequality for the lowest paid parents

24 Feb 2014, by Guest in Society & Welfare

For many single parents, childcare is the vital cog that helps them to balance their busy lives. It gives them time to find, keep and progress in work. It offers that little bit of breathing space to tick off the tasks on their to-do list. But the ever-rising price of childcare is throwing a spanner in the works.

Costs have risen by nearly 40% in the last 10 years whilst wages have remained flat. Parents are now frequently spending over £100 per week for 25 hours of nursery care.

The result is that single parents are increasingly trapped between a rock and a hard place. If they choose to go out to work or increase their hours, a huge chunk of their pay will go straight out on childcare – in some cases leaving them worse off than if they had stayed at home. But if they do stay at home, they sacrifice their income and future career prospects.

This is a tough decision for any parent, but for single parents the choice can be particularly problematic. Single parents are reliant on a sole income. They tend to enter the lowest paid occupations. Childcare costs can therefore leave them out of pocket and struggling to cover the costs of everyday essentials. They are also single-handedly responsible for their children’s childcare – unable to tag-team on the school or nursery drop-off/pick-up in the way that couples can.

Not before time, reform to the childcare system is on the way. As well as agreeing on the importance of childcare, politicians have committed to further investment, which is extremely welcome. What isn’t so welcome is that fact that this investment is set to disadvantage those parents on the lowest incomes.  

When universal credit is introduced, parents earning enough to pay income tax will be able to claim 85% of the costs of their childcare – a level that we know will make a real difference in making work financially worthwhile. However, parents on the lowest incomes who earn too little to pay income tax will only be able to claim 70% of the costs of their childcare.

The lowest earning parents will therefore receive the least support. Parents already struggling to pay for childcare will be left without any additional help, whilst childcare costs continue to rise. Sadly, as sole earners, single parents will account for many of those trapped by this financial roadblock.

It is not too late, however, for the Chancellor George Osborne to remove this barrier. When he announces his Budget on March 19, he has the opportunity to make one small commitment that could make a big difference to the lives of single parents in Britain. We are calling on the Chancellor to invest an extra £200m into childcare so that all parents on universal credit will be able to claim back 85% of their childcare costs, no matter what their income.

This would make the world of difference to single parents. It will make taking on extra hours, or even going back to work in the first place, affordable. It will halve the amount that parents have to pay for each hour of childcare.

Yes, it means additional investment, but let’s not forget that the Chancellor also found the money to introduce from 2015 a system of ‘tax-free childcare’ support for those earning above universal credit limits, which will be available to single parents and couples earning up to £150,000 each. We believe that the lowest earning parents also deserve extra help with their childcare costs.

If you want to make our call to the Chancellor as loud as possible, you can support our campaign by signing up to our Thunderclap. On March 10 tweets and Facebook posts from hundreds of supporters across the country will be sent out calling on the Chancellor to introduce a Budget that supports low earners with the costs of childcare and makes the government’s commitment to ‘making work pay’ a reality. Join with us in demanding a Budget for Childcare.

4 Responses to End childcare inequality for the lowest paid parents

  1. Angela
    Feb 24th 2014, 2:16 pm

    I am just trying to get my head around these changes. As a low earner (minimum wage, mainly because of childcare responsibilities) it seems as though I am being punished for being low paid. Am I right in thinking that if I earned say £20 an hour, I would be eligible for more support?

  2. Matt Hawkins
    Feb 24th 2014, 2:47 pm

    Hi Angela,

    It would all depend on how many hours you were working at £20 per hour as the main thing will be your annual income. Under universal credit, if you are earning £10,000 (the income tax threshold) or over then you will be able to claim back 85% of your childcare costs back. If, however, you are earning less than £10,000 then you will only be able to claim back 70% of the costs. I should add that universal credit has yet to be fully rolled-out – it will start affecting single parents in 2016 at the earliest.

    You can find out a little bit more about our campaign and the planned changes to childcare here: http://gingerbread.org.uk/content/1971/Budget-for-Childcare—what-are-we-calling-for?

    I hope that helps, Angela?

    Best wishes,

    Matt

  3. Angela
    Feb 24th 2014, 5:12 pm

    Ok – so just to be clear. What I’d like to know is, if I was working for 16 hours a week on say £20 an hour instead of minimum wage, as a single parent, would I then be entitled to more support for my childcare?

  4. Matt Hawkins
    Feb 25th 2014, 11:12 am

    Hi Angela,

    If you were on universal credit then yes you would be entitled to more childcare support because your income on minimum wage would be under the £10,000 tax threshold but on £20 per hour you would earn over £10,000 per year – entitling you to the 85 per cent level of support.

    It would depend, however, on whether an income of £20 per hour qualified, 16 hours per week entitled you to receive universal credit. If that income was too high for you to receive universal credit then you would instead claim childcare support through the Tax Free Childcare system. That would entitle you to have 20 per cent of your childcare costs covered up to the value of £1,200 per child.

    I hope that’s useful, Angela.

    With best wishes,

    Matt