UC childcare costs – onwards and upwards?

Henri Krishna describes new rules on UC childcare costs.

In the spring 2023 Budget, it was announced that the maximum monthly amount of the universal credit (UC) childcare costs element would increase and that provisions would be put in place to pay childcare costs ‘upfront’ for UC claimants starting work or increasing their hours. Amendments to regulations 34 and 36 of the Universal Credit Regulations 2013 made by the Universal Credit (Childcare) (Amendment) Regulations 2023 (SI No.593) came into force on 28 June 2023.

The maximum monthly amount of the UC childcare costs element had not increased in the 10 years since UC started being piloted. In fact, the childcare component of working tax credit (WTC) has not increased since 2005. In that time, the actual costs of childcare have increased substantially and proved a barrier for many entering work, or increasing their hours or staying in work.

From 28 June 2023, the maximum amount of the UC childcare element is increased to £950.52 a month for one child or £1,603.13 a month for two or more children – above the current rates of inflation to reflect, at least in part, the actual increases in the costs of childcare over the last 10 years. UC will still meet only 85 per cent of actual childcare costs paid up to the maximum, and these increases are not replicated for WTC.

UC childcare costs are paid in arrears – ie, only after the claimant has paid them. Attempts to challenge this policy had ultimately been unsuccessful.1R (Salvato) v SSWP [2021] EWCA Civ 1482. Permission to appeal to the Supreme Court was refused. As such, claimants starting work have had to pay these costs ‘upfront’ from elsewhere before they can reclaim them from UC. The DWP’s policy for some years was to offer upfront childcare costs via its Flexible Support Fund (FSF)2Some guidance on the FSF can be found deposited in the House of Commons library, accessible via rightsnet.org.uk/index.php/universal-credit-guidance. A form of the FSF has existed for decades but is often not well known to advisers or claimants and, as such, take-up is low. to those starting work or increasing their hours. However, the claimant had not been able to claim UC for those same costs, as they had been met by ‘other relevant support’ rather than by the claimant themself, so the problem was just pushed back to the next assessment period. UC claimants could apply for a repayable budgeting advance instead.

From 28 June 2023, the amendments allow the UC childcare element to be paid to the claimant for the childcare costs met by the FSF (where the claimant has started work or increased their hours, or is due to).3The amended regulations exempt ‘payments made by the Secretary of State’ in connection with starting work or increasing hours for relevant childcare payments from the definition of ‘other relevant support’. Once received, they can be put toward the next set of costs. DWP guidance suggests the FSF payment will go directly to the childcare provider.4See ADM Memo 12/23 Hopefully, the DWP will make claimants aware that the FSF is available in these circumstances.