UK childcare payment system discriminatory and irrational, judge rules

A single mother who brought a legal challenge against the government over its “ridiculous” universal credit childcare payments system has won her case after a high court judge ruled it to be discriminatory and unlawful.

Nichola Salvato, 49, from Brighton, had argued that the Department for Work and Pensions (DWP) requirement that she pay hundreds of pounds upfront to childcare providers before she could claim back the money through universal credit plunged her into debt and forced her to reduce her working hours.

The court ruled that the “proof of payment” rule disproportionally discriminated against women, who account for about 80% of all universal credit childcare payment claimants, and had left Salvato worse off financially and psychologically.

In a judgment issued on Friday morning, Mr Justice Chamberlain said the childcare payment system, which estimates suggest will be used eventually by 500,000 UK parents when universal credit is fully rolled out, was irrational and subjected Salvato and other mothers to indirect sex discrimination under human rights law.

Salvato, a welfare rights adviser, said she was “over the moon” about the ruling, saying it was “ridiculous” that hard-up families had to find the money for childcare costs upfront, while better-off families earning up to £200,000 a year could get help for their childcare costs in advance through the tax system.

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“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,” she said.

However, any changes to the system will have to wait, as the DWP is appealing against the judgment. It said: “This is currently a matter for the court and the secretary of state is appealing this decision.”

The judge dismissed the government’s argument that the system was necessary to prevent fraud, saying it was “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)”.

Salvato had needed three-and-a-half hours a day childcare after starting full-time work for a housing association in September 2018. She could not afford the £377.40 upfront childcare costs and had to borrow the money, putting her into a “cycle of debt” where she was “constantly owing childcare as well as loan providers and struggling to find the money to cover payments”.

Several months later, and “overwhelmed with the juggle of work, childcare, parenting and ongoing poverty” she cut her working hours to 32 a week, and then 25.5 hours to minimise childcare costs, increasing her dependency on the benefit system.

Carolin Ott, of the law firm Leigh Day, who represented Salvato, said: “Universal credit was designed to support parents moving into or advancing in work, yet our client, like thousands of others, found herself unable to pay for childcare upfront, facing severe hardship and forced to reduce her working hours.”

Salvato’s legal challenge was supported by the charities Save the Children UK and Gingerbread, as well as the Professional Association for Childcare and Early Years and the National Day Nurseries Association.

Becca Lyon, the head of child poverty campaigns at Save the Children, welcomed the ruling, saying: “For years we have been hearing from parents that the system is unfair is forcing them to run up debts, face financial hardship, or even drop out of work altogether because they can’t afford to pay childcare or nursery fees in advance.”

Victoria Benson, the chief executive of Gingerbread, said: “Nichola’s win is great news for single parents who are unfairly hit with the burden of upfront childcare costs. Single parents need childcare in order to work but it’s often impossible for them to find hundreds of pounds to pay for childcare upfront.”