Rishi Sunak blocked key measures designed to help the poorest households with the rising cost of living, government sources have claimed.
Documents seen by this newspaper show Therese Coffey, the work and pensions secretary, drew up formal proposals to use childcare funding provided through the Universal Credit system to pay for activities held after school and in holidays.
The plan was due to be announced earlier this month, after Boris Johnson said he wanted the government to “be flexible in the way you use the right to childcare”.
Dr Coffey told colleagues the proposals would “make a difference now”, helping to tackle the problem of “very high childcare costs”.
But government sources said the Treasury blocked the move, after Dr Coffey wrote to Johnson and Sunak outlining the proposals.
A source said the plan was killed after the Treasury said there was too much risk of money being lost to fraud.
“The Treasury objected directly, arguing that the fraud risk was far too high, without actually offering its proposed mitigation measures, and clearly has no interest in the financial benefits of this policy in general, as well as the significant benefit to families,” the government source said. .
“Once again, it stands in stark contrast to their stance on government fraud. They care about fraud on the one hand here when it comes to cutting childcare costs, but are blasé about the billions being lost in the pandemic.”
On Saturday, a source close to Sunak said: “Rishi actually wanted to fundamentally reform how childcare support and Universal Credit interact to get more support to families faster, but was told this was not possible by the Department for Work and Pensions.
“What he did was set up the £200m-a-year Holiday and Activity Fund to help provide activities for children during the holidays.”
“Problem with very high childcare costs”
Currently, working parents claiming Universal Credit can claim an extra sum of £646 per month for one child, or £1,108 for two or more children, towards childcare costs. But the payments can only be accessed for childcare provided by organizations registered with Ofsted – mainly nurseries and schools themselves.
In a letter to members of the government’s home affairs and economy committee, which includes Sunak and is chaired by Johnson, Dr Coffey – who is now backing Liz Truss’s leadership campaign – said in June: “This means that many forms of childcare will not be covered unless providers choose voluntarily register with Ofsted, which excludes parents from large parts of the nursery market for those over eight.
“In addition, the DWP is proposing to amend the regulations to include certain group-based providers, for example: providers of school holiday activities; comprehensive school-based providers; out of school; nurseries.”
The letter said Sunday schools, nannies, babysitters and tutors would be excluded.
In the letter, Dr Coffey said the proposals stemmed from the Prime Minister’s request for ministers to find “solutions to the problem of very high childcare costs”.
She added: “The average cost of childcare for one child aged two or under is around £260 per week, which is over three times what the average family spends on food. This is a huge burden on families, alongside bigger, rising costs for living pressures. We must therefore find solutions that make a difference now.”
Dr Coffey also cited the proposals as a way to increase take-up of the childcare element of Universal Credit.
The Finance Ministry has insisted it is taking action to prevent fraud involving Covid support schemes which “were implemented at unprecedented speed”.
A government spokesman said: “Leaks of government information undermine our system of collective government, undermine public trust and harm British interests.
“The government takes all allegations of leaks seriously and, where necessary, we fully investigate.”