Introduction 

Coram Family and Childcare are experts on childcare. We bring together what we learn from our on the ground parent-led programmes with our high quality research. Our annual Childcare Surveys provide the definitive information on childcare costs and availability in Great Britain.

In this submission, we draw on our own evidence to answer the committee’s questions on how well Universal Credit supports families with childcare costs, most notably our data on childcare costs which show that even with the support available through Universal Credit, childcare costs are an insurmountable barrier to work for many families.

How childcare support is paid 

Our research found that the average price of 25 hours of childcare per week at nursery for a child under two is £137. Childcare providers typically ask for a deposit and the first month’s bill to be paid upfront to cover their costs and protect them from bad debt. For a parent using part time childcare for just one child, this will be around £600. It will be significantly higher if full time childcare is needed, they need to pay upfront costs for two or more children or if they live in an area where childcare costs are higher. This payment will need to be made before the child starts childcare and so also before the parent starts work or has been paid. This acts as a significant cost of taking up work or increasing hours and so is likely to deter some parents.

While the flexible support fund can be used to help meet these costs, there is little evidence about whether this is being done consistently and whether parents are aware of its existence. It could be made more effective if parents were guaranteed that it would cover their upfront childcare costs (rather than being at the discretion of advisors) and that this was well publicised to parents who were considering moving into work or increasing working hours.

Caps and limits on support 

Childcare costs now significantly exceed the caps on the monthly amounts reimbursed through Universal Credit. Our Childcare Survey 2021 found that in 99 per cent of local authorities the cost of a full time childcare for a child under two exceeds these caps. In 9 per cent of local authorities, it does not cover even 25 hours of childcare needed to work part time. This can mean that families end up worse off for working more hours, or even that they are not better off at all if they move from not working to working full time.

While the solution on paper is to simply reduce working hours and therefore the amount of childcare that is used, in practice, this is often not feasible. Firstly, the nature of Universal Credit as one lump sum payment can mean that it is hard to identify that it is the shortfall in childcare costs that is causing the problem. Secondly, it may not be possible to reduce working hours or to find part time work. Claimants can be sanctioned for not taking up work, even if it will leave them financially worse off because of childcare costs.

To give parents genuine choices about whether and how much to work, it is essential that these caps reflect the true costs of childcare. The caps should not be based on the average cost of childcare nationally but instead the highest costs a parent could reasonably be expected to pay. Childcare costs vary considerably in different parts of the country. The average price of 25 hours of childcare per week is £180 in Inner London compared to a national average of £137 and some providers are charging 70 per cent more than this. Families need childcare near their home or place of work, limiting their ability to shop around to find lower cost providers and so it is unrealistic to assume that all families will be able to find childcare at average prices.

Our work with parents has found that parents find the childcare system confusing, and Universal Credit is one of the most complicated parts of this system. While some families will be able to claim 85 per cent of their childcare costs, the vast majority are entitled to considerably less than this and so will still face high childcare costs. This will be particularly relevant for second earners in couples (normally mothers) who will be entitled to less support with childcare costs because of their partner’s earnings and so may well be worse off financially if they start work. The proportion of childcare costs that are supported through Universal Credit should be adequate to ensure that it is financially worthwhile for parents to work.

Effects on childcare providers 

In practice, formal childcare is largely used by higher income families and, even with the support available through Universal Credit, lower income families are considerably less likely to use formal childcare. The exception to this is the Free Early Education Entitlement, the 15 and 30 hours funded childcare offers, which are used by most families. This means that the caps do not have a significant effect on childcare providers, simply because most of their customers are not claiming Universal Credit. Even when parents are claiming support through Universal Credit, childcare providers may well not know. High quality childcare has been shown to have a positive effect on outcomes for children, so this disparity in childcare use risks embedding or exacerbating existing inequalities.

Advice on childcare support 

At Coram Family and Childcare, we host the National Association of Family Information Services. Family Information Services (FIS) are teams in local councils who provide information and advice to families about childcare. Some of these teams have formed excellent partnerships with their local Jobcentre Plus which has enabled claimants to easily access expert advice on childcare.

However, many teams struggle to form this partnership meaning that families miss out on the expert advice FIS could provide. Decisions about work and childcare are complex for families and so expert advice is crucial. Better local and national partnerships between Jobcentre Plus and Family Information Services would be beneficial for parents and families.

Wider childcare support 

Childcare holds the potential to change lives and tackle inequalities through boosting young children’s outcomes and supporting parents to work, raising family incomes. However, the current childcare system is not fully achieving this potential. A myriad of different, well-intentioned schemes have been layered on top of each other to create a system that is overly complex. This means that it is poorly understood by parents and childcare costs freeze some parents out of work.

Better value for money could be achieved by bringing together all the different schemes into one simple, progressive system that ensured all parents were better off working and all children were able to access the high quality childcare that boosts their outcomes. We provide a blueprint for how this could work in Creating an Anti-Poverty Childcare System.

For further information or if you have any questions about our submission, please contact Ellen Broomé, Managing Director of Coram Family and Childcare at ellen.broome@corambaaf.org.uk