Ministers are considering allowing parents on universal credit to claim back more cash on childcare as a way of easing rising cost of living pressures.
The government’s childcare offer is also expected to help boost the number of childminders by making it easier for them to register with agencies rather than signing up via Ofsted.
The change, which would be part of the spring budget next week, could be accompanied by a reported restructure of universal credit to allow upfront payments for childcare. Parents are currently forced to pay costs upfront before being reimbursed.
Whitehall sources suggested there was a preference to focus on allowing parents on universal credit to claim back more money on childcare costs.
UC claimants can receive 85% of costs but these have been capped since 2005 – equivalent to a real-terms cut of 56%.
The maximum that can be claimed is £646 per child and £1,108 for two children, but the chancellor, Jeremy Hunt, is considering raising that cap. If costs had kept pace with inflation, they would be close to £1,200 and £2,000 respectively, according to the Institute for Fiscal Studies thinktank.
MPs have also campaigned for the poorest families on universal credit to have their childcare costs paid up front, rather than being reimbursed by the Department for Work and Pensions once a month. But Treasury sources suggested there were risks including overpayments involved in changing the approach.
Analysis from the IFS said lifting the cap would help fewer families than some other changes – because the take up of paid childcare was low and many families did not claim exceeding the cap.
The IFS also said it was clearly an issue for many families that childcare was paid by the DWP in arrears, which it said would “create a barrier for families who want to work but lack the disposable cash to pay for a month’s childcare costs out of pocket”, though said there was risk of over-payments.
The work and pensions secretary, Mel Stride, hinted he was considering changes to the cap in exchanges with Labour’s Jonathan Ashworth last week.
In the Commons, Ashworth said many women “are blocked from returning to work because of childcare costs. Given that we should be doing more to help parents move into work, why has he now frozen the childcare cost cap in universal credit for the seventh year in a row?”
Stride said the government would “come forward with measures, and no doubt we will have something to say about the matter he has raised”.
Other key reforms which have been pushed by education ministers include changes to childminder registrations to make it easier for new childminders to enter the market.
Plans, which were put out to consultation last year, included reducing the upfront costs of becoming a childminder as well as making the registration process easier. Industry leaders who have met ministers have asked for new money to allow agencies rather than Ofsted to register childminders, which can be an onerous and lengthy process.
