Single parent households will be no better off under the Universal Credit, warns report
Katy Morton
Tuesday, November 13, 2012
The Universal Credit will fail to provide all working single parent families with a route out of poverty, and could act as a disincentive to work longer hours, according to new research carried out on behalf of the charity Gingerbread.
The report Struggling to make ends meet, by Donald Hirsch from the Centre for Research in Social Policy at Loughborough University, reveals that the rising costs of childcare and housing, combined with the way Universal Credit is calculated, will mean that many families will get stuck on a financial plateau where working longer hours will make little financial sense.
It warns that under the Universal Credit, being introduced next year, single parent households on low and median incomes, particularly those with high housing or childcare costs, will get stuck below the poverty line, while others will still fall short of the Minimum Income Standard. The Minimum Income Standard is the level of income needed for a minimum acceptable standard of living in the UK, which currently stands at £16,400 a year for one person.
Low income households are referred to as those where a single parent earns the minimum wage of £6.19 an hour. A median income is considered to be a wage of around £11 an hour.
According to the report, a single parent on the minimum wage is unable to significantly increase her family income by working more than ten hours a week. For every additional hour worked, the family only gains £1.50 in income, with the rest being lost in reduced Universal Credit and higher tax and national insurance. There is also the added cost of childcare. An extra hour of childcare would reduce net income by another £1, leaving less than 10 per cent of additional wages in the family purse.
It goes on to say that families with more than one young child, even on a wage of £11 an hour, could end up little better or worse off working longer hours if they have to pay for additional childcare, particularly if they are in London where childcare prices are at their highest.
A single parent on a median income working more than 29 hours a week only keeps £2.70 for every additional hour worked, but must pay a childminder an average of £5.16 (childcare costs based on Daycare Trust figures).
Ahead of the government’s Autumn Statement next month, where more detail is expected on plans for the Universal Credit, Gingerbread is calling on the Government to ensure that its final decisions on the amount awarded under the Universal Credit means that work always pays for single parents.
The charity recommends the Government consider giving more substantial support for childcare costs, increases the amount that single parents can earn before Universal Credit is withdrawn, and reduce the rate at which it is tapered away once earnings exceed the threshold.
Fiona Weir, Gingerbread’s chief executive said, ‘Through universal credit the Government has the opportunity to make work pay and offer real financial incentives for families on low wages to work more hours – which many want to do. However, we have discovered that for many single parents, working longer hours won’t necessarily pay.
‘This is about supporting single parents into work, into more hours and to lift their families out of poverty – which is exactly what the government claims it wants to do. But unless the Government gets it right now, the sums just won’t add up for too many single parents.’
The report forms part of Gingerbread’s Make it work for single parents campaign, which is pushing for a comprehensive approach to ensure that all single parents have access to a decent job that allows them to lift their family out of poverty.
It warns that under the Universal Credit, being introduced next year, single parent households on low and median incomes, particularly those with high housing or childcare costs, will get stuck below the poverty line, while others will still fall short of the Minimum Income Standard. The Minimum Income Standard is the level of income needed for a minimum acceptable standard of living in the UK, which currently stands at £16,400 a year for one person.
Low income households are referred to as those where a single parent earns the minimum wage of £6.19 an hour. A median income is considered to be a wage of around £11 an hour.
According to the report, a single parent on the minimum wage is unable to significantly increase her family income by working more than ten hours a week. For every additional hour worked, the family only gains £1.50 in income, with the rest being lost in reduced Universal Credit and higher tax and national insurance. There is also the added cost of childcare. An extra hour of childcare would reduce net income by another £1, leaving less than 10 per cent of additional wages in the family purse.
It goes on to say that families with more than one young child, even on a wage of £11 an hour, could end up little better or worse off working longer hours if they have to pay for additional childcare, particularly if they are in London where childcare prices are at their highest.
A single parent on a median income working more than 29 hours a week only keeps £2.70 for every additional hour worked, but must pay a childminder an average of £5.16 (childcare costs based on Daycare Trust figures).
Ahead of the government’s Autumn Statement next month, where more detail is expected on plans for the Universal Credit, Gingerbread is calling on the Government to ensure that its final decisions on the amount awarded under the Universal Credit means that work always pays for single parents.
The charity recommends the Government consider giving more substantial support for childcare costs, increases the amount that single parents can earn before Universal Credit is withdrawn, and reduce the rate at which it is tapered away once earnings exceed the threshold.
Fiona Weir, Gingerbread’s chief executive said, ‘Through universal credit the Government has the opportunity to make work pay and offer real financial incentives for families on low wages to work more hours – which many want to do. However, we have discovered that for many single parents, working longer hours won’t necessarily pay.
‘This is about supporting single parents into work, into more hours and to lift their families out of poverty – which is exactly what the government claims it wants to do. But unless the Government gets it right now, the sums just won’t add up for too many single parents.’
The report forms part of Gingerbread’s Make it work for single parents campaign, which is pushing for a comprehensive approach to ensure that all single parents have access to a decent job that allows them to lift their family out of poverty.
