The report by the charity Gingerbread found the rising costs of childcare and housing, combined with the way Universal Credit is calculated, means that working longer hours will make only a negligible difference to net household income for many single parents.
The study, which was conducted by the Centre for Research in Social Policy at Loughborough University, highlights how families will be affected when the system is launched next year, based on an analysis of how projected Universal Credit entitlements compare to families’ needs.
“The government has been very clear in its commitment that work will always pay under Universal Credit and that every additional hour of work will always pay,” said Caroline Davey, director of policy at Gingerbread.
“What our report shows very clearly is that won’t be the case for a significant number of single parents and that’s because not enough investment is being put in to areas like childcare costs.
“We are very concerned that those promises won’t be fulfilled unless more investment is made in Universal Credit and we are looking to the announcements in the autumn statement when the government will make its final decisions about the amount of money going into Universal Credit.”
Gingerbread is calling on the government to give families more support for childcare costs, increase the amount single parents can earn before Universal Credit is withdrawn, and reduce the rate at which the benefit is decreased beyond that threshold.
The charity estimates that about half a million of the single parent households that will move onto Universal Credit next year will have a lower entitlement than under the current system, based on the government’s own impact assessments.
“While it is true to say that 700,000 will have a higher entitlement, having 500,000 single parent households with a lower entitlement under the new system is very troubling,” said Davey.
“We would expect a significant chunk of those families to be the group we’re talking about – people with high housing and childcare costs, who are in work but aren’t particularly better off from working more hours, because the amount they lose will be more than the amount they’re earning.”
Universal Credit comes into force from October 2013, and will replace tax credits and benefits including Jobseeker’s Allowance, income support, child tax credit and housing benefit with a single credit payment.