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Universal Credit childcare costs case to be heard by High Court

By agency reporter
November 10, 2020

A single mother who had to cut her working hours and fell into debt as a result of paying upfront childcare costs will have a hearing in the High Court this week.

Nichola Salvato has been granted a judicial review of the Government’s requirement that costs for childcare be paid upfront before they can be reimbursed through Universal Credit (UC).

The way the UC payments are calculated and made means that Ms Salvato and thousands of other parents have to find the money upfront before they can claim 85 per cent of it back from the Department of Work and Pensions (DWP). This causes real difficulties as many parents such as Salvato who are returning to work do not have spare money to pay for childcare up front. They need to work before they can make these payments.

Despite working full time as a welfare rights advisor, Salvato was unable to afford the high costs of childcare up front especially during the school holidays. She had to borrow money from a payday lender to help pay for childcare and in the end,  had to reduce her working hours so she could care for her child herself.

The judicial review hearing will be held on Tuesday 10 November and Wednesday 11 November.  Salvato's legal team will argue that the DWP’s requirement for proof of up-front payment of childcare under UC is irrational because it undermines UC’s stated aim of encouraging and supporting parents seeking to move into or advance within the workplace. They will also argue that it indirectly discriminates against women because it disproportionately affects single parents who are predominantly women.

Nichola Salvato worked part-time when her daughter was younger, but after her child's 10th birthday, decided to go back to full-time work. She was taken on full time as an advisor at a housing association, which meant her daughter needed before and after-school childcare, as well as school holiday childcare.

But under the UC system, Salvato had to meet the costs of childcare first herself then claim 85 per cent back from the DWP. The necessity of recourse to a payday lender’and borrowing from family to meet the up-front costs left her with high-interest debt and in constant arrears. In an attempt to reduce the costs of childcare, she also had to take time off work and has ultimately had to reduce her working hours. If she had been able to claim 85 per cent of the costs back by providing the DWP with an invoice, she would not have faced any of these issues and would have been able to hold down her full working hours.

Salvato said: “I am looking forward to the opportunity for the judge to hear my case. I hope the case will result in a change to the system that will help all working parents to advance within the workplace, and especially to be able to face the school holidays. Parents should be able to work without the constant worry of how they are going to juggle work and keeping their children safe and well cared for, without the fear of falling into debt.”

Salvato is represented by Leigh Day solicitors Carolin Ott and Tessa Gregory. Leigh Day solicitor Carolin Ott said: “We look forward to presenting our client’s case in the High Court and we hope that the court finds that the proof of payment requirement for childcare under Universal Credit is unlawful.

“The case is important for working parents claiming the childcare element of UC, with potentially far-reaching implications for lone parents in particular. Over 50,000 households are already receiving the childcare element of UC, with more than half of households who will eventually be affected still to be moved onto the new benefit. The case presents an important opportunity to avoid discrimination, as well as remove a key obstacle to movement into and advancement within the workplace for parents, especially for single mums. The case is also being supported by Save the Children, Gingerbread and PACEY.

Becca Lyon, Head of Child Poverty at Save the Children, said: “The hearing offers a glimmer of hope to families on Universal Credit who have been pushed into debt and hardship by upfront childcare costs. It’s just not right that parents like Nichola are being forced to take out loans because they can’t find the money for childcare.

“All of us believe that women should have the same opportunities to go to work as men. But not only are women already shouldering most of the burden of childcare, they’re now also being held back by a system which forces them to run up debts of thousands of pounds if they choose to go to work.

“The government needs to change the system so that it works for parents. That means giving them the money they are entitled to for childcare under Universal Credit before they need to pay their nursery or childminder, instead of setting them up to struggle by leaving them in arrears. Changing the way childcare payments are made could make a huge difference to families on low incomes, giving them the opportunity they need to go back to work and boost their pay.”

Victoria Benson, CEO of the single parent charity Gingerbread said: “Gingerbread are pleased that the legal challenge brought by single parent, Nichola Salvato, against the government will be heard at the High Court next week. Sadly, Nichola’s experiences with Universal Credit and the requirement to pay the costs of childcare upfront are not uncommon. Many are having to pay these costs before they receive any salary and can face a wait of up to a month for repayment through Universal Credit. This is simply unaffordable for many hard-working single parents who do not have the means to pay childcare costs upfront and who are too often being forced into desperate financial circumstances due to the unfairness in the current system." 

Liz Bayram, Chief Executive at the Professional Association for Childcare and Early Years (PACEY) commented: “We hope that the case being heard in the High Court next week will be a positive step forward for both parents and practitioners. Universal Credit’s current requirement that claimants are reimbursed for the cost of their childcare place, rather than given the funds in advance, clearly isn’t working. It means many vulnerable families are put in an impossible financial position and, with so many more families now relying on universal credit since the pandemic, the impact of this approach is increasing every day.

“For registered childcare providers, it means they either have to turn away a family in need or cover that cost until the reimbursed is given to the parents. Pair that with low levels of government funding and little or no support through the pandemic and you have an ongoing snowball of issues. Providers must remain sustainable which then means parents like Nichola have to take out loans of up to £1000 to secure a place or are forced to use less childcare, reduce their working hours or stop working all together – the opposite of what Universal Credit aims to achieve.

“Universal credit has to change to recognise the reality for parents and providers alike by paying their childcare costs upfront and then facilitating manageable repaying processes, that avoid placing families in debt. We look forward to seeing the outcome of this case and hope that it will shine a light on parents like Nichola and a system that needs to change.”

* Leigh Day https://www.leighday.co.uk/

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