Financial expert Martin Lewis revealed the “only flaw” in the government’s expansion of childcare funding, announced in yesterday’s budget.
Councilor Jeremy Hunt has promised 30 hours of free childcare for all babies over nine months old in a bid to boost economic growth by encouraging parents to go back to work.
He also confirmed that childcare will be paid upfront for those on universal credit.
The maximum amount parents can take out for childcare will also increase from £646 to £951 for one child, and from £1,108 to £1,630 for two children – an increase of just under 50 per cent.
However, Lewis warned in a video posted to Twitter that it would not cover all benefits.
He said: “The only thing wrong with this is that this doesn’t apply to the old benefits, in other words, those who get childcare tax credits, you won’t see the corresponding increase.
“My suspicion is that many who have higher childcare costs and have tax breaks would be better off switching to universal credit.”
However, Lewis explained that switching to universal credit “wasn’t a simple decision, particularly because universal credits qualify for so-called deductions, which many in tax breaks don’t enjoy.”
“You should always get one-on-one help before making this decision,” he said.
Currently, parents with universal credit can claim 85 percent of their childcare costs back — but they have to pay upfront first. This will change under the new plans so that people are not left out of pocket.
Speaking of the changes, which will come into effect in the summer, Mr Hunt said: “Many remain unemployed because they cannot afford the down payment needed to access subsidized childcare.
“So for any parents who commute to work or want to increase their hours, we will pay for their child care up front.
The budget also included up to 30 hours a week of free childcare for eligible families in England with children as young as nine months old, rather than three- and four-year-olds under the current policy.
The Phased Scheme aimed at removing barriers to work, which will be fully introduced by September 2025, will be worth up to £6,500 per annum for working families.
The chancellor also pledged to expand universal start and end-of-day care for parents with older children and changes to staff-to-child ratios in England to expand the provision of childcare.
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