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Universal Credit forcing parents to take out payday loans to cover childcare costs, charity says

Save the Children claims new benefits system is forcing parents into debt

Tom Barnes
Wednesday 03 July 2019 06:53 BST
Save the Children is warning parents on low incomes can see childcare costs skyrocket during school holidays
Save the Children is warning parents on low incomes can see childcare costs skyrocket during school holidays (PA)

Parents claiming Universal Credit are being forced to take out payday loans to cover childcare costs this summer, potentially driving them hundreds of pounds into debt, a charity has warned.

Research, carried out by Save the Children, claims thousands of families are thought to be paying for care upfront, before waiting up to a month to be reimbursed through the new benefits scheme.

The charity said some parents could may fall into debt attempting to pay for childcare during the summer holidays, when costs rise further as they are not eligible for free government provisions.

Nichola, a single mum of one from Portslade, West Sussex, said she was forced to borrow from family and even take out payday loans to cover childminder costs during the school holidays.

“It’s enormous stress – you’re always on the back foot. Every six weeks there’s a half term,” she said.

“I’ve borrowed from my family to pay the last half term, and when I can’t come up with the extra money I’ve taken time off, but I’ve only got one week’s holiday left this year and there’s a six-week holiday coming up.

“How am I going to do this? This isn’t about the odd £50 – we’re potentially talking about having to find thousands.”

The study found even those with pre-school-aged children who were eligible for 30 hours free childcare a week through Universal Credit could see their costs drastically increase, as they lose their entitlement during the holidays.

Families can “stretch” their allowance over the period by cutting the amount of care they use during term time. However, this still means they may only receive as little as four-and-a-half hours a day over a working week.

Analysis showed such parents would need to find as much as £833 extra during the six-week break in order to fund additional care through holiday clubs or childminders.

Martha Mackenzie, Save the Children director of UK poverty policy, called on the government to offer greater help to parents in paying for childcare upfront.

“It’s simply not right that families are being driven into poverty and debt by soaring childcare costs. Parents tell us it feels as if the system is stacked against them,” she said.

“They rely on childcare to go to work but when the school holidays come around they find themselves faced with sky-high childcare bills they can’t afford.

“They are having to resort to desperate measures – cutting back on essentials, falling behind on bills or getting into debt – just to go to work.”

Universal Credit is designed to bring together six means-tested benefits into a single monthly payment for low-income households. It includes provisions for childcare support previously provided through Working Tax Credit.

There are currently 30,000 parents across the country receiving support with childcare through UC.

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However, around half a million families are expected to be claiming under the scheme once it is fully rolled out.

UC has already come under extensive criticism, including over concerns long payment delays could force claimants into rent arrears, projections it could leave many families worse off and reports it has led to a rise in food bank usage in some areas.

The Department for Work and Pensions (DWP) said Universal Credit claimants could receive help paying for upfront childcare costs by applying for a budgeting advance, which offers claimants a loan usually paid back through reduced UC payments over the next 12 months.

It said others may be eligible for help under the Flexible Support Fund, which offers non-repayable awards under the discretion of Jobcentre advisers.

A DWP spokesperson said: “Help with upfront childcare costs is already available, either through our non-repayable Flexible Support Fund or as a budgeting advance.

“We’re committed to helping parents into work and those on Universal Credit can claim up to 85 per cent of their childcare costs, worth up to £13,000 a year for families with two children.”

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