Universal Credit “dangerous flaw” forces parents with childcare costs into debt, says Labour

Tulip Siddiq has called on the government to use the Budget to fix a “dangerous flaw” in the universal credit system that she says is pushing working parents into thousands of pounds worth of debt.

The shadow minister for early years made the intervention this morning, shortly ahead of the Budget that the Chancellor Rishi Sunak is due to deliver to parliament on Wednesday.

Siddiq said that parents on the benefit are having to pay large amounts of money for childcare before they are able to claim back financial support, and is asking the government to announce a change in how the assistance is provided.

The call from the Camden MP follows the news that Nichola Salvato, a single mum forced into debt by universal credit, has been granted judicial review on the grounds that the benefit discriminates against women.

Commenting on the issue, Siddiq said: “It is shocking that parents on low incomes are being forced to stump up huge sums for childcare, waiting at least a month for the support they are entitled to. We know from many heart-breaking cases that this is driving families into poverty and debt.

“Childcare costs have soared under the Tories, so it is more important than ever that parents can access the childcare they need without falling in to debt. The government must urgently fix this dangerous flaw in universal credit.

“By fixing this problem in the Budget on Wednesday, ministers could help millions of working families and avoid the humiliation of defending this appalling policy in the high court.”

Salvato is taking the department for work and pensions (DWP) to court after the flaw in the way universal credit is administered forced her to reduce her working hours and resulted in her accruing a debt of £2,000.

She worked full time and has a daughter who needs childcare before and after school. The benefit required her to pay the costs of that childcare upfront and then claim it back from the DWP later.

Parents on universal credit can claim up to 85% of monthly childcare costs up to £646, but they have to pay childcare providers upfront and only receive the money back in arrears.

Many parents resort to using payday lenders, or are faced with the prospect of reducing their hours to cope, and there are currently 2.2 million children growing up in poverty in the UK – an increase of 25% since 2010.

Various campaigners have been urging ministers to intervene and change the way in which the benefit works, and the ‘Mums on a Mission’ group recently handed a petition of more than 102,000 signatures to the government.

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