Parents on Universal Credit forced into debt to cover school holiday childcare costs

4 July 2019

Parents are having to find up to £800 to cover the costs of childcare over the summer holidays.


Thousands of parents claiming Universal Credit are being forced to pay childcare costs upfront, before waiting up to a month to be reimbursed, according to Save the Children.

The charity says parents are having to find up to £800 to cover the costs of childcare over the summer holidays.

Parents can claim back 85% of their childcare costs on Universal Credit, but having to pay money upfront has left families struggling.

Many are having to take out loans to pay for the increased costs of childcare over the holidays or even give up work.

When childcare costs rise during the school holidays, many parents rely on holiday clubs or childminders while they are at work.

Save the Children says a parent with a three or four-year-old receiving 30 free hours of childcare would face an increase of £631 on average.

What parents end up paying largely depends on where they live, with those living in London paying the most at £833.

Parents living in the East Midlands are paying £535 for childcare over the summer holiday, while those living in the North East are paying £643.

Average monthly increases for three- and four-year-olds in the summer holidays in England

Region Increase
East Midlands £535
East of England £619
Inner London £833
Outer London £749
North East £643
North West £529
South East £654
South West £620
West Midlands £645
Yorkshire and Humberside £554
England £631

Source: Save the Children 2019

Nichola, a single mum of one from Portslade, West Sussex, says she was forced to borrow money from family and had to resort to payday loans to cover childminder costs during the school holidays.

She says: “It’s enormous stress – you’re always on the back foot. Every six weeks there’s a half term. I’ve borrowed from my family to pay the last half term, and when I can’t come up with the extra money I’ve taken time off, but I’ve only got one week’s holiday left this year and there’s a six-week holiday coming up.

“How am I going to do this? This isn’t about the odd £50 – we’re potentially talking about having to find thousands."

Universal Credit brings together six means-tested benefits into a single, monthly payment for low-income households. Under the current system, parents can make a claim for help with childcare costs in advance of paying nursery bills.

There are currently 30,000 parents in England getting support with childcare through Universal Credit and this is set to rise to half a million when the benefit is eventually rolled out nationwide.

Save the Children is calling on the government to make changes to Universal Credit to prevent more vulnerable families being pushed into debt.

Martha Mackenzie, Save the Children’s director of UK Poverty Policy, says: “It's simply not right that families are being driven into poverty and debt by soaring childcare costs. Parents tell us it feels as if the system is stacked against them.

“They rely on childcare to go to work but when the school holidays come around they find themselves faced with sky-high childcare bills they can’t afford. They are having to resort to desperate measures – cutting back on essentials, falling behind on bills or getting into debt – just to go to work.” 

A Department of Work and Pensions spokesperson says: “Help with upfront childcare costs is already available, either through our non-repayable Flexible Support Fund or as a budgeting advance.

“We’re committed to helping parents into work and those on Universal Credit can claim up to 85% of their childcare costs, worth up to £13,000 a year for families with two children.”

Managing your debt

Setting a budget is often the first step to help you get on top of your finances. Knowing how much you have coming in every month and what you need to spend helps you work out the best way to deal with your debts.

Some debts are more important to deal with than others, so make sure you prioritise those first.

Although credit card interest might be higher than your mortgage, missing mortgage payments can have more serious consequences as you could lose your home.

Credit card debt can be expensive, so it makes sense to pay this off as quickly as possible.

Council tax is another important bill to keep on top of. You could be sent to prison for up to three months if you fail to pay it.

Balance transfer cards allow you to consolidate all your debt in one manageable payment. Transferring over to a credit card that offers 0% interest on purchases can make debt repayments easier.

Some of the best deals will allow you to borrow for more than two years, giving you extra breathing space to pay off your debt.

If you are worried about debt you should seek help from a debt advice charity such as Citizens Advice, StepChange or National Debtline.

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