Single mum wins landmark Universal Credit court case

Nichola Salvato, 49, from Brighton, was plunged into a ‘cycle of debt’ after having to pay hundreds of pounds upfront for Universal Credit, before being able to claim it back.

The current system has been widely criticised by early years organisations like National Day Nurseries Association (NDNA) and Professional Association for Childcare and Early Years (PACEY), who claim that it not only causes distress and debt for many parents, but it also creates cash flow pressure on struggling providers.

A high court judge ruled on 22 January that the Department of Work and Pensions’ mechanism for assessing and paying the childcare costs element of Universal Credit, which requires ‘proof of payment’ from working parents before they receive funding, is unlawful.

The judgment said that this rule subjected Ms Salvato and other mums in her situation, who account for about 80 percent of all universal credit childcare payment claimants, to indirect sex discrimination and described the rule as ‘irrational’.

Ms 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.
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 she was working full time, she could not afford the £377.40 of upfront childcare costs that arose in September to October, so she had to borrow the money. This led to what she described as a ‘cycle of debt’ where she was constantly owing childcare as well as loan providers and struggling to find the money to cover payments.

By January 2019, Ms Salvato was becoming overwhelmed with the juggle of work, childcare, parenting and ongoing poverty. She took as much time off as she could to minimise childcare costs and was constantly stressed and worried. Eventually she had to cut her work to 32 hours, then 25.5 hours, which reduced her monthly income and increased her dependence on benefits.

Despite her victory, hopes of overhauling the system for others are on hold, as the DWP is appealing against the judgment. A spokesperson said, ‘This is currently a matter for the court and the secretary of state is appealing this decision.’

Support from the sector

Ms Salvato’s legal challenge was supported NDNA, PACEY, Save the Children and Gingerbread, whose evidence showed 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.

Purnima Tanuku, chief executive of the 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.’

Liz Bayram, chief executive at PACEY, said, ‘We know that many providers feel unable to provide childcare to claimants because they cannot pay the upfront charges that nurseries and childminders need to charge to cover the cost of providing the place. Whilst some providers do provide childcare before payment is received, most are unable to take that risk. So this ruling will not only help families use Universal Credit to get the support they need to get into work or to increase their working hours; it will also mean more providers can offer that support.’

Ms Salvato’s case was represented by Leigh Day law firm and Matrix Chambers.