The Benefit System, Welfare to Work

– Lone parents set to lose 94p in every pound.

Lone parents will lose 94p in every pound earned

The Prime Minister David Cameron rightly denounced the “injustice” of low-paid lone parents losing 96p in every extra pound earned.  However, a report published yesterday by lone-parent support charity, Gingerbread, brought to light that 94p will be lost by low-income earning single parents in 2013 when the government’s Universal Credit is launched.  Gingerbread commissioned the Resolution Foundation to conduct analysis of the impact Universal Credit will have on single-parent families, especially the changes that will come in regarding childcare support.

The report states;
  • a single parent with one child and earning the national minimum wage (£5.93 per hour) would be disinclined to work more than 24 hours per week as they would only keep 6p of every pound earned for every hour worked over this level.

This is due to tax credits on childcare being reduced as National Insurance and income tax rises the more hours worked.  i.e single parent would be only £7.50 better off if they worked two full days per week, instead of one.

Gavin Kelly, Chief Executive of the Resolution Foundation, said:

Further increases in childcare costs risk driving parents – especially mothers – on low-to-middle incomes out of full time work. Doing more than part-time work just wouldn’t make you better off. Living standards are already severely squeezed and this would be a further hammer-blow to working families”

This follows on from the Department for Work and Pensions report of April 2011, Families and Work: Revisiting Barriers to Employment, which highlighted a lack of suitable childcare and depletion of In-Work credit act as further hurdles to lifting families out of unemployment.  In February this year, the Family Information Services in England, Scotland and Wales reported that childcare had increased by 4.8% over the last year.

Who else will be hit?

A second earner working for a living wage (£7.20) with two children would only keep 9p of every pound over a 20 hour working week, and would not be entitled to any more money from working over 30 hours.  In launching the Welfare Reform bill the government had explained:

“The majority of existing or potential second earners do not see their work incentives affected by the Universal Credit because their household is already earning too much to be eligible for income related support under UC”.

However, Fiona Weir, Chief Executive of Gingerbread, said:

Government plans for childcare are a ticking time-bomb for welfare reform. Prime Minister David Cameron’s high profile pledge to single parents to make work pay will be broken unless the Treasury can find extra funding for childcare”.

The DWP report also picked up on the notion between some parents that working simply does not pay.  Indeed during an interview with researchers, “Sharon”, a lone parent looking after a four year-old child, commented that in her experience there are few incentives to return to work

The Committee stage of the Welfare Reform Bill is due to be concluded this week.

Kuki Taylor

Research and Communications Officer

Read more here

1 Comment

  1. i am a single parent i was working 2 days aweek. now that that goverment has made these major cut backs my employer can only offer me 1 shift some weeks. this affects my working tax credit which has been halfed coursing me to struggle and cannot pay my bills and to maintain living standards.
    even if i go to work full time i will still be in poverty. wages are just not there to sustain a reasonable living.That also incudes any help from benefits. The goverment has may life to expensive to live !

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