Fertile field for people on benefit

Neil Bateman looks at the incentives in place for claimants to
undertake childminding.

We have a shortage of childminders in our area but many people
on benefit who could take on this work. Are there any social
security incentives for people to become childminders?

The availability of quality, affordable child care is a key
factor in the welfare-to-work matrix. Yet the evidence suggests
that the number of childminders is on the decline. Fortunately,
benefit incentives mean that people on benefit can find it
worthwhile to become a childminder.

For example, for income support, someone can do more than 16
hours a week as a childminder without their benefit stopping –
indeed, there is no upper limit on the hours a childminder can do.
The rules about earnings also differ. Normally, most claimants can
earn only £20 a week at most before their income support
starts to be reduced pound for pound. Some people can still earn
only £5 a week.

But for childminders, only one-third of their earnings counts,
and the normal earnings disregard also applies to that third. So a
childminder who is a lone parent earning £210 a week has just
£70 counted as earnings, of which £20 is disregarded.
This means that only £50 is taken off her income support – she
keeps £160 of her earnings.

Even taking account of the additional expenses associated with
being a childminder, there is scope for some long-term benefit
claimants to undertake this work. Helping benefit claimants to
become childminders also helps other claimants into work.

So some well-targeted and expert take-up work could result in a
real win/win economic regeneration initiative. Equally, a poorly
thought-out initiative without expert welfare rights help and
advice could be counter-productive.

The rules are also generous when it comes to tax credits. The
normal 16-hour rule applies, so a childminder can choose to claim
either income support or working families tax credit once their
hours reach this level. The same rules about one-third of net
earnings/profit being counted also apply.

However, this situation does create a dilemma, as some people
will be better off claiming working families tax credit while
others should claim income support – it depends on factors such as
housing costs, ages and numbers of children, child support
received, and whether there are any other earnings or income.
People can easily get confused and opt for the worse alternative.
There is clearly a need for some expert help.

In particular, a mortgage or rent may mean that a childminder
may be no better off on working families tax credit. Other factors
include the value of free school meals for people on income support
– worth a good £6 or so a week per child – and how regular the
childminding work is.

A further factor is how good the local housing benefit service
is, as in the better-off scenario housing benefit is critical. If
people have to wait three months for their money, it actively
undermines their work incentive as well a creating a lot of
stress.

But on technical grounds alone, I would recommend that a
thorough better-off calculation is done. Anything else is likely to
be wrong or long-winded.

In the example mentioned above, a childminder earning £210
with one 15-year-old child of her own, paying £65 a week rent
and £15 a week council tax, would be about £20 a week
better off if she opted for working families tax credit rather than
income support. However, lower earnings levels would mean that this
childminder might be better off on income support.

These examples all illustrate the importance of a proper
benefits check.

Finally, don’t forget that childminders can also get reimbursed
for milk given to children under five.