A single mother who found herself £2,000 in debt trying to pay for childcare has won a landmark Universal Credit court case to get the costs paid upfront.
Nichola Salvato, 49, brought a legal challenge against the Universal Credit 'proof of payment' policy which only reimbursing the money to parents once it has been spent.
She argued that the money should be paid to parents in advance as long as they have proof that they are liable for the payments - as is the case with housing costs.
The judicial review at the High Court found in her favour, with judge Mr Justice Chamberlain concluding that the policy has 'disproportionately prejudicial' effects on women and is 'irrational'.
He said the policy was 'bound to have a greater adverse effect on women than on men' because women earn 'substantially less' than men as a group.
Nichola Salvato, 49, (pictured) brought a legal challenge against the 'proof of payment' policy of only reimbursing the money to parents once it has been spent
Ms Salvato from Brighton, East Sussex, tried to return to work full-time in her role as a housing association adviser once her daughter turned 10.
As it stands, the Department for Work and Pensions (DWP) will only refund parents and carers 85 per cent of their childcare costs through their Universal Credit payments once it has received proof that they have been paid - rather than when they are incurred.
Ms Salvato was forced to rely on payday lenders to pay for childcare - and eventually ended up owing £2,000.
She suffered anxiety as she struggled to make childcare payments and eventually had to reduce her working hours.
Ruling in her favour, Mr Justice Chamberlain added: 'The proof of payment rule contributed to making the claimant materially worse off - financially, psychologically and ultimately in terms of her ability to realise her ambition to work full-time - than she would have been if the (childcare costs element) had been payable on proof of liability to pay childcare charges.'
In a statement after the ruling, Ms Salvato said: 'I'm over the moon with the ruling, I always felt that the rule was unfair and discriminatory.
The judicial review at the High Court (file, image pictured) found in her favour, with judge Mr Justice Chamberlain concluding that the policy has 'disproportionately prejudicial' effects on women and is 'irrational'
'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 £200,000 per year got help for their childcare costs in advance through the tax free system.
Ms Salvato (pictured) from Brighton, East Sussex, tried to return to work full-time in her role as a housing association adviser once her daughter turned 10
'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.'
The judge said the DWP's decision to make eligibility for childcare costs dependent on proof of payment 'adversely affects' those who are entitled to childcare costs, more than 80 per cent of whom are women.
He added that women are 'substantially more likely than men to be denied access' to childcare costs because they 'do not have enough money to pay childcare charges out of their own funds before being reimbursed'.
Ms Salvato's case was supported by Save the Children, the Professional Association for Childcare and Early Years (Pacey), and Gingerbread, a charity supporting single parent families.
In a statement, Save the Children said the ruling will help 'half a million parents' in England and Wales to stay 'in work and out of poverty'.
Currently the Department for Work and Pensions (DWP) (file image) will only refund parents and carers 85 per cent of their childcare costs through their Universal Credit payments once it has received proof that they have been paid - rather than when they are incurred
Becca Lyon, the charity's head of child poverty campaigns, said: 'For years we have been hearing from parents that the system is unfair and 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.
'As we come out of the pandemic and the economy begins to recover, access to childcare is especially important to get the economy moving again.
'We look forward to working with Nichola and the DWP to make sure this change is implemented quickly and in the best way possible for families.'
At a hearing in November last year, the court was told that around 83 per cent of households receiving the childcare element of universal credit are single parents, and 90 per cent of lone parents are women.
Chris Buttler, representing Ms Salvato, said the current situation was a 'catch-22' for parents that locks them out of the labour market.
He argued that the way childcare payments are currently made is undermining Universal Credit's aim of 'encouraging and supporting parents seeking to move into or advance within the workplace'.
The DWP argued that the Universal Credit system was designed to reduce error and fraud, which was a big problem for the previous benefits system, and said the payment of childcare costs was 'advantageous to women'.
He said the policy was 'bound to have a greater adverse effect on women than on men' because women earn 'substantially less' than men as a group. Pictured: Work and Pensions Secretary Therese Coffey
But the judge concluded that tackling fraud did not provide a justification for the discriminatory effect of the proof of payment policy and said it would be 'more accurate' to say that the reimbursement of childcare costs went 'some way towards addressing a significant structural inequality' - that women form the 'great majority' of those whose access to work depends on being able to pay for childcare.
Solicitor Carolin Ott of law firm Leigh Day, who represented Ms 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.
'The Secretary of State committed to a 'test and learn' approach in rolling out Universal Credit yet refused to listen to the many campaigning organisations and individuals who have raised this issue for a number of years.
'Our client hopes that the Secretary of State will accept the ruling and take urgent steps to fix this perverse situation which, as noted by the court, is a barrier to work and has disproportionately prejudicial effects on women.'