Working single parents will be worse off under universal credit – but the government can change that
Caroline Davey Director of Policy at Gingerbread
30th Oct 2013
As the government's Universal Credit initiative to combine several welfare payments into one goes into its next phase, Caroline Davey from Gingerbread talks about the negative impact that it will have on many single parent families. Even though the government wants Universal Credit to make work pay, working single parents will find it difficult to reap the benefits of working more hours.
Almost all of the UK's two million single parent families receive some form of benefit, whether they are in or out of work. As a group, they are significantly affected by the introduction of universal credit - the government's flagship scheme to combine six benefits into one single payment - with all single parents due to be in this scheme by the end of 2017.
The double whammy is that working single parents (...) will lose a higher proportion of their weekly income under universal credit than any other household type.
Getting the right financial support in place is vital for working single parents who, under the current system, can struggle to make any gain from a pay rise or taking on extra hours. Nicola, a working mother from Kent, is in this situation: "I feel like the government keeps you in this box. If I earn any more it's immediately taken away from my housing benefit, so I'm no better off."
As well as the difficulty they face in making work pay, single parents have the challenge of finding a family-friendly job and the right childcare to go with it. Given these challenges, it's perhaps not surprising that while 71% of mothers that are in couples work, only 60% of single parents have a job.
Universal credit is intended to tackle one of these barriers: to always make work pay. It includes a specific commitment that "universal credit will make work pay - at each and every hour".
But our report 'Credit crunched: Single parents, universal credit and the struggle to make work pay', which we launched today, shows that the government will not meet that objective unless changes are made to the way that universal credit payments are calculated.
The research, by Professor Mike Brewer and Dr Paola De Agostini at the Institute for Social and Economic Research (ISER), has revealed worrying impacts of universal credit. Single parents will lose out in cash terms under universal credit compared to the current system and the double whammy is that working single parents - whether earning on or above the minimum wage - will lose a higher proportion of their weekly income under universal credit than any other household type.
What's more, universal credit will make very little difference to the ability of single parents to gain from progressing in work.
Single parents looking to enter work part-time, in particular up to 20 hours per week, will see an increased financial return from work compared to the current system. But as their hours of work increase towards full-time, the gains they make from those hours will decrease significantly.
Getting the right support in place
There are solutions available to the government to make work pay for the vast majority of single parents, and it's not too late for ministers to make changes.
We want the government to increase the amount that people can earn before universal credit begins to be withdrawn.
We want the government to:
- Increase the amount that people can earn before universal credit begins to be withdrawn
- Reduce the steep rate at which benefits are taken away from earnings, to make increases in hours or wage always worthwhile.
These changes would make a huge difference to single parents all over the UK. Parents like Aimee in Cardiff, who is working but still struggles to get by. "I know what it's like to be a single parent on benefits living on the breadline, and I know what it's like to be a working single parent only getting a little bit more breathing space", she says. "Something more needs to be done to financially support parents who are in work. At the moment it feels like, financially, I would be better off on benefits."
The government has the power to ensure that work always pays. This research outlines what clear steps need to be taken now to make a difference to these families. Will the government rise to the challenge?