Universal Credit

The previous post looked at the changes announced on Tuesday to “childcare accounts”, a subsidy to working parents to help pay for nursery and/or childminders. But for lower income parents, there was a more important change announced regarding Universal Credit, the government’s all-singing, all-dancing, not-yet-working reform to the benefits system, due to be rolled out at some point in the next few years.

Most of the coverage on the childcare changes has focused on the subsidy. But the Universal Credit changes are important and they affect a lot of people: about one half of all households with dependent children will receive UC.

The childcare fix announced today suggests how, in a complex system where rates are being changed from year to year, such disincentives can still emerge. The change sounds simple: under UC, the government will now pay for up to 85 per cent of childcare costs, rather than 70 per cent, as previously proposed. This is why it was necessary:

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Universal Credit is the government’s flagship reform to the benefits system. It is also in complete disarray, according to a National Audit Office report released on Thursday. The document is perhaps the most scathing NAO verdict I have read on a large public project. Read more >>