Www.cpag.org.uk Childcare, Universal Credit and job entry Welfare to work convention 2011 1 July,...
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Transcript of Www.cpag.org.uk Childcare, Universal Credit and job entry Welfare to work convention 2011 1 July,...
www.cpag.org.uk
Childcare, Universal Credit and job entry
Welfare to work convention 20111 July, Charter 4
Development of tax credits
• Family credit disregard - 1994
• CCTC introduced WFTC - 1999
• Greater ‘responsiveness’ in WTC - 2003
• 32,000 getting FC disregard in 1997
• 318,000 in 2004 – average £43.67
• 493,000 in 2011 - average £69.23
The problem?
• Still only 14% of all families getting WTC report getting it (Parents Survey, 2009)
• 24% report paying for childcare ‘difficult/very difficult’
• Lone parents/couples – 34%/20%
• The higher the costs the more difficult (although more likely to be working)
Key problems
• Remaining 30% to pay (April 2011)
• Responsiveness/Complexity
• Fear of overpayments – 2005 package
• Keeping track – averaging
• Changes –eg, summer hols
• Only for those working 16 hours
• Parents pay the lion’s share – 70%
• Budget 2010 – overpayments will be back
Consultation 2008
• Options:
• Use actual costs
• Income bands
• Previous year
• Pay to providers
• Vouchers
• Pilots – 2 LDA, 2 HMRC
Options proposed by sector
• Switch in the main to supply-side
• Attach to child tax credit
• Pay 100% costs
• Return to fixed periods
• Separate out childcare element – pay hourly, locally, link to quality – as NZ
• Income bands best option
Universal Credit
• Started with blank sheet
• Disregard considered
• Flat-rate considered
• Decided on percentage costs up to maximum
• Funding envelope £1.7 bn increased to £1.9 bn
• To cover all working hours
Options being considered now
• Percentage of costs covered
• Maximum limits paid
• Hours rules
• Age of child
• Family type
Percentages and limits
• 70% childcare costs
• up to - £125 one child - £210 two or more
• 80% childcare costs
• up to - £100 one child - £150 two or more
• 620,000 families covered (DWP)
Keep hours rule?
16 hour rule as today:
• 70% - up to £160 one child - £270 two or more
• 550,000 families covered (DWP)
16 hour rule for couples only:
• 70% - up to £150 one child - £250 two or more
• 570,000 families covered (DWP)
Age of child
• Pay, only if youngest under age 5:
• 80% - up to £175 one child - £300 two or more
• Vary limits by age of child
• Around 620,000 covered (DWP)
• School-aged children?
Effect of taper
• 65% taper means tapers off at lower earnings level for some families
• Capital rules apply to working families
• Tariff income - £1 per week deducted for each £250 between £6,000 and £16,000
Winners and losers
Winners:
• Those working under 16 hours
• If 80% - higher proportion covered (?)
• Increased take-up (?)
Losers:
• Currently getting up to 95.5% of costs covered due to HB, CTB disregards
• Higher costs will be limited by new, lower maxima
• Higher earners and those with capital > £16k
DWP estimates
Option 70% to £125/£210 80% to £100/£150
Total – TCs or UC 680,000 680,000
Receiving more from UC
400,000 430,000
Av. Incr. (Wkly) £50 £50
Less from UC 280,000 250,000
Av. Loss (Wkly) -£30 -£35
Other effects
• 240,000 have lower entitlement simply due to move to UC• Transitional protection• Preference (?) for working part-time• ‘parents with young children should be supported to work
a small number of hours’• Considerable proportion left for families to pay
Key considerations:• Marginal deduction rates (METRs)• Disincentives to work entry• Disincentives to progress in work• Size of funding envelope
www.cpag.org.uk