Childcare rules on Universal Credit are keeping single parents out of work

If Rishi Sunak wants a balanced budget to put life back into Britain’s workforce, he needs to help single mothers on welfare back to work, writes Eve Redmond

The fast approaching budget will be a test for Rishi Sunak. With inflation above 10 per cent lingering over the still relatively fresh-faced PM, an impactful yet sensible budget is desperately needed. Balancing the two is no easy task.

Perhaps the most vital area where the government should flex its muscles is to combat soaring childcare costs. With a dried up employment pool both feeding inflation and stifling economic growth, ensuring parents – particularly mothers – are able to continue working is crucial. 

Many commentators have rightly pointed out the exorbitant costs of childcare and called for reform. But little attention has been paid to the failure of Universal Credit to ensure affordable childcare for single parents, of whom 90 per cent are mothers. Inadequate and inaccessible childcare for this group is pushing down employment and working hours. 

In 2022, the employment rate amongst single parents reached a six year low, with just 67.7 per cent classified as employed, nearly half of which worked only part-time. As a result, 962,000 single mothers, whether in-work on low-pay or fully unemployed, are claiming Universal Credit. Alongside this, many single parents who are in work are described as underemployed, meaning that their time, qualifications and skills are not fully utilised, with many working less hours than they would like to and typically in lower skilled jobs.

Currently, those on Universal Credit can claim up to 85 per cent of their formal childcare costs back. However, this 85 per cent figure is set at 2005 price levels, and claimants will only receive a maximum reimbursement of £646 for one child, or £1108 for two or more children. This payment is also paid retrospectively, meaning single parents, who make up the majority of families with dependent children on UC, have to pay the first months’ bill up-front and wait to be reimbursed, which can sometimes mean a cost of £800 for a single mother. This failure in both accessibility and adequate financial support massively restricts single parents’ ability to get their children into childcare. 

This only pushes parents further away from the job market. Single parents have been forced to reduce their hours to offset childcare costs, or remain out of employment entirely. 

In recognition of this, the government is presently working on reducing the fee that parents on Universal Credit have to pay upfront, as well as potentially increasing the rates of childcare elements of Universal Credit.

The government should also seriously consider if the childcare element of Universal Credit should be paid directly to childcare providers as soon as the child has been offered a place. Although these seem like sensible moves, questions still remain about whether the government will go ahead and leave it to later down the line. 

Our workforce needs workers now. Our economy needs a more productive state and the Conservative party has long stood for helping people back into work. Outdated and inadequate childcare rules are hampering all of this potential for progress.