Working mum wins her claim challenging the requirement for parents on Universal Credit to meet childcare costs upfront 

Single mum Nichola Salvato has won her legal case regarding the requirement to provide proof of payment to obtain Universal Credit childcare payments.Child - court

In a judgment handed down today, Friday 22 January 2021, it was ruled that the Department of Work and Pensions’ mechanism for assessing and paying the childcare costs element of Universal Credit (the “Proof of Payment” rule), which requires proof of payment from working parents before they receive funding, is unlawful. 

Nichola, aged 49, of Brighton, made her case in a judicial review after the Proof of Payment rule put her in debt and forced her to reduce her working hours.
In September 2018 she began working full time as a welfare rights adviser for a housing association, and needed up to 3.5 hours childcare per day for her then 10-year-old daughter.

Although Nichola was working full time, she could not afford the £377.40 of upfront childcare costs that arose in September-October, so she had to borrow the money. The requirement that she pay childcare costs before she could claim them back through Universal Credit meant that this situation continued in the months that followed and gave rise to what she described as a “cycle of debt where I was constantly owing childcare as well as loan providers and struggling to find the money to cover payments”.

Her legal challenge was supported by Save the Children, Gingerbread, the Professional Association for Childcare and Early Years (PACEY) and the National Day Nurseries Association (NDNA). Their evidence supported Nichola’s case that payment for childcare fees upfront was vital for working parents and childcare providers alike and that the current system puts families in significant hardship and debt. Their evidence also showed that the payment system was a barrier to working and progressing in work for single parents and single mums in particular. 

Government lawyers argued that the Proof of Payment rule had been put in place to reduce error and fraud, which had been a major problem under the legacy tax credits system.

However, Mr Justice Chamberlain said: “It is not obvious why a system of awards based on liability to pay (evidenced by an invoice) would be any more likely to result in error or fraud than a system based on actual payment (evidenced by a receipt).”

Nichola Salvato said: “I'm over the moon with the ruling, I always felt that the rule was unfair and discriminatory, it seemed ridiculous that the most hard up families getting help for childcare costs through Universal Credit had to find the money for childcare costs upfront, sometimes thousands of pounds per month, while better off families earning up to £200k per year got help for their childcare costs in advance through the tax free system. It is such a clear barrier into work, when the whole point of welfare reform and Universal Credit was that it would act as an incentive to work enabling and supporting lower income families to work or work more and realise their employment ambitions and all the benefits that brings to a family. 

“I'm so very pleased that the judge has ruled that the way that childcare costs are administered through Universal Credit at the moment is unlawful and I really hope that the DWP recognise that a speedy change to the system is going to have an enormous and very welcome impact on the lives of hundreds of thousands of lower income families across the country, the very group of people that the Government says it wants to help......the change really cannot come soon enough.”

Purnima Tanuku OBE, Chief Executive of National Day Nurseries Association (NDNA), said: “Nurseries have raised many concerns with us about how the childcare element of universal credit works. The upfront requirement of proof of payment, as well as denied claims, have left parents and families distressed and sometimes getting into debt.

“Our members have seen parents unable to take up places and struggling to make payments which creates cash flow pressure on struggling providers but can also deprive children of access to high quality care and education. To support parents into training or work we need a system that works for them, not one that creates barriers.

“We welcome any move towards making childcare support payments simpler for providers and parents across the board. The Government should adopt our proposal for a single childcare account to simplify the system for parents and ensure that funding for a child, follows that child to the providers delivering their care and education.”

Read the full press release here