Universal Credit and Childcare Costs

08/02/2021

The High Court has ruled that the requirement for Universal Credit (UC) claimants to pay their childcare costs upfront before receiving the childcare costs element (CCE) is unlawful.

The effect of monthly assessment periods and making payments in arrears is that a claimant is entitled to be paid the CCE as part of her UC award only if she has already paid the charges, rather than merely incurred them. Claimants therefore have to find ways of paying the charges from their own funds.

The Claimant, Ms Salvato, was a single mother who wished to work full-time and was, in principle, eligible to receive the CCE. However, she found that she could not afford to pay the fluctuating costs of childcare and, as a result, became indebted and ultimately had to reduce the number of hours she worked.

Ms Salvato contended that, by failing to provide for payment of childcare charges which have been incurred but not paid, the Secretary of State for Work and Pensions had subjected her to unlawful indirect discrimination on grounds of sex and acted irrationally.

The judge found that the regulations contributed materially to making her financially worse off than she would have been had advance payment of the CCE been available; and that it contributed materially to the cycle of debt and the associated psychological effects she describes and that these were prejudicial effects.

The judge also found that this had disproportionately prejudicial effects on women as a group. The regulations were bound to have a greater adverse effect on women than on men, because women as a group earn substantially less than men as a group. It follows that women are substantially more likely than men to be denied access to the CCE because they do not have enough money to pay childcare charges out of their own funds before being reimbursed.

The judge also found that the claimed administrative costs associated with direct payment or with a voucher system do not constitute a reasonable foundation for the regulations as they stand.

As a result, her claim succeeded.

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