Claire Perry: Childcare reform will help support parents

Today the Government has announced £300 million of additional childcare support to make work pay for parents.

The Coalition have pledged that under the Universal Credit parents will be able to claim for childcare support no matter how many hours they work – ending the current criteria that they must work for at least 16 hours a week. This move will especially benefit single parents and those parents on low incomes.

Commenting, Claire Perry, MP for Devizes said:

'The Government knows how hard these times are for mothers and fathers across the country so this is brilliant news for the 80,000 families who will benefit. It is right that the Government is not only supporting families, but also supporting families get back to work.'

Notes:

• The Government has announced new childcare reform under Universal Credit. The Government has announced £300 million of additional childcare support to make work pay for parents. Currently, parents must work for at least 16 hours per week to be able to claim for childcare support through tax credits. This requirement stops many parents from entering the workplace. But under the new Universal Credit, parents will be able to claim for childcare support no matter how many hours they work. This will boost the incentive to work for 80,000 extra families. Families will continue to be able to recover childcare costs at 70 per cent – up to £175 for one child or £300 for two or more children per week. Universal Credit is on track to begin in 2013 (DWP Press Release, 7 October 2011).
• Parents must work at least 16 hours per week to be eligible for childcare support – this is a barrier to work. Working parents can only claim to recover childcare costs – through the childcare element of the Working Tax Credit – if they work for at least 16 hours per week (HMRC). Parents working for fewer hours than this could face very high effective tax rates after tax, after benefits are taken away and once childcare costs are taken into account. This means they would be worse off in work than out of work (DWP, Universal Credit, p. 57). Supporting these families is crucial to boosting the incentive to work.
• Around half a million families currently receive childcare support. There are around 500,000 families who currently receive the childcare element of tax credits. Lone parents and couples where both parents work for at least 16 hours per week can claim 70 per cent of childcare costs of up to £175 per week for one child and up to £300 per week for more than two children. The average amount claimed is around £95 a week (HMRC, Child and Working Tax Credit Statistics, April 2011).
• To give working parents more flexibility – they can claim monthly, not weekly costs. Currently parents' claims for childcare costs under the Working Tax Credit are set at weekly maximum limits. This will be changed to monthly limits to provide working parents with more flexible support. Some weeks for parents are more expensive than others – for example during the school holidays, some weeks are more expensive than others. So, under Universal Credit, parents will be able to recover childcare costs of 70 per cent of up to £760 per month for one child or £1,300 per month for two or more children – this would allow a parent to buy up to 40 hours of childcare per week if they chose to do so.
• Transitional protection for families moving from tax credits to Universal Credit. Transitional protection will ensure families moving from tax credits, where circumstances have not otherwise changed, receive at least the same level of overall support under Universal Credit. Many families will receive a higher net payment under Universal Credit, as we know that families with children are more likely to gain overall than households without children.
• Support for childcare plans from Save the Children. Gareth Jenkins, Save the Children: 'Today's announcement is good news for parents on low incomes who are working less than 16 hours a week. And it's good news for the fight to tackle child poverty too because when this help comes in it will mean more income going into those families and also it will mean that those parents who are out of work are more likely to be able to take up work because they will be getting more help with their childcare costs' (BBC News, 6 October 2011).

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