Childcare support ‘skewed’ to better-off

The extra support for childcare costs proposed by the government is skewed towards wealthier households, even among those who will qualify for universal credit, according to a new report from the Resolution Foundation think tank.

Key points

  • A higher level of childcare support is welcome news for those families on universal credit that will be eligible for more help. But the proposed extra support will not benefit the majority of families with children, particularly those who are on low wages and struggle most with the escalating costs of childcare.
  • Low-paid second earners who work part-time will be worse off if they increase their hours than if they did not work at all. They will be paying to work – in contrast to the government’s stated objective for work to always pay.
  • Higher earners, who already face stronger work incentives than second earners on lower wages, benefit more from the proposed new support. They will have 85 per cent of their childcare costs paid, whereas lower-earning families will be able to recover only 70 per cent.
  • It is crucial to improve childcare support for low-paid second earners, who tend to be in the poorest working families. Extending 85 per cent support for childcare to all families in receipt of universal credit could be financed by limiting eligibility for the tax-free childcare voucher available to better-off families.

Source: Giselle Cory, All Work and No Pay: Second Earners' Work Incentives and Childcare Costs under Universal Credit, Resolution Foundation
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Publication date: 
Aug 24 2013