Childcare support and the hours trap: the Universal Credit

Published on Tax and Welfare

The Government recently announced the terms under which childcare costs will be supported as part of Universal Credit from 2013. It has made an extra £300m available, compared to present spending levels. This briefing updates the earlier briefing Childcare support and the hours trap, published in May 2011, to show the impact of the government’s final proposal for childcare support on work incentives for single parents and second earners.

  • The government will spend approximately the same amount supporting childcare under Universal Credit as it did under the pre April 2011 system. It will put extra resources into enabling people to work short hours by helping them with their childcare costs, as well as making them eligible for other parts of Universal Credit.
  • To pay for this, support for everyone has been reduced. This will particularly affect work incentives for people on modest but not very low wages, people working enough hours not to have any entitlement to Housing Benefit and second earners. Overall, it will mean that while Universal Credit helps some of the poorer families on benefits to become a bit better off, it will limit the potential for families on modest means to rise above a minimum living standard. For such families, it will put a lid on aspiration.