At a committee grilling today, officials admitted there were ‘marginal’ cases where a parent working 30 hours could be worse off than one working 25 under childcare rules – but a minister insisted: ‘it’s not necessarily just about ‘are you £1 or £2 better off’
Some working parents are left worse off by taking longer hours under Universal Credit, MPs were told today – despite the benefit’s flagship vow to “make work pay”.
Officials admitted there are examples when a parent of a one-year-old could be better off working 25 hours than 30 hours under the benefit’s childcare rules.
DWP director-general for poverty and family Donna Ward said such a person “should probably work 25 hours in that case”, because “there will always be those kinds of cliff edges in any system”.
Minister Mims Davies added: “It’s not necessarily just about ‘are you £1 or £2 better off’. Quite often you’re not.
“You know, by the time you’ve bought lunch or done the travelling or missed out time with the kids.”
Ms Davies insisted work was still worth it “for long-term wellbeing, for that experience within the household, for that positivity, the confidence of earning a pay packet and bringing it home”.
But SNP MP Chris Stephens said the situation seems “rather odd”, telling ministers at the Work and Pensions Committee: “It does seem there’s a systematic failure there.”
Labour MP Neil Coyle added: “Are ministers comfortable with that?”
Currently parents on UC can claim up to 85% of childcare costs – but only up to a £646-a-month cap, and they must pay up-front and claim back later.
Ministers said “there are no current plans” to raise the cap – which has not changed since 2016 – a policy Tory MP Nigel Mills branded “nonsensical”.
But they insisted only 9,100 parents – 8% of those who claim childcare – are currently hit by the cap.
MPs clashed with ministers and officials in an inquiry hearing into whether the childcare rules should be reformed.
Tory MP Sir Desmond Swayne said some parents have “a great deal of difficulty meeting the upfront costs of childcare”.
And Mr Stephens said: “We pointed out that a one child parent who worked 30 hours a week would be worse off than if they had worked just 25 hours a week.
“So what is the department doing to address that issue?”
DWP official Ms Ward replied: “It’s always going to be the case that if somebody’s exceeded the maximum support available for childcare, and now they’re paying for it themselves, the marginal hours won’t be worth it.
“And that’s going to be the case wherever you put the childcare cap.”
She admitted there are “difficult trade-offs” in how rules interact, but it would likely be a “moment in time” and that person’s situation would change as their child grows up.
Welfare delivery minister David Rutley said the “marginal rate is one thing” but the “benefit of work in the wider picture” was important too.
He added: “Obviously with a one-year-old it can be more challenging because the provision isn’t always as readily available and it can be a lot more expensive.
“Once you start getting to a two-year old if that person is disadvantaged they’ll be getting more support, an extra 15 hours.”
But he resisted saying free childcare should be widened for the youngest children, saying it was an “expensive proposition” as childcare already costs the government £6bn a year.
Ms Davies insisted people who previously had barriers to work were being “given a chance” to get jobs under Universal Credit, and that was “life changing”.
She added: “Can we do more, do we need to do more? Absolutely. But I think this is a sea change revolution in terms of inclusivity in the workplace.”