Child Poverty Special Report: The poverty trap

"Rent in the hostel should be decreased - nearly £200 a week is disgusting," says Cheralea, 18, from Kent. Embarrassed about being on benefits, she is angry too. "I had a job, but I had to leave. You could work your arse off. And even if I earned £1,000 a month, which is not going to happen, I would be left with £50 a week (after rent). What incentive to work is that?"

Cheralea's situation is far from unique (see feature, p20). In fact, the system is trapping young people on benefits. But why, and what needs to change?

The high cost of supported accommodation is one reason. CYP Now has uncovered a wide variation in costs that appears not to mirror the level of support offered.

Steve Hillman, policy and research manager at The Foyer Federation, which provides accommodation to homeless young people, says £800 a month "doesn't sound outrageous".

Monthly rent and service charges at Christian Alliance Housing, another provider of supported accommodation for young people, range from £381 to £976. A unit providing a very high level of support to mothers and babies comes in at £1,044 a month. Ged Sutcliffe, operations director at the charity, says the costs reflect the level of support offered, which, as well as basics, includes teaching young people life skills such as budgeting.

Funding cuts

But Balbir Chatrik, director of policy at homelessness charity Centrepoint, says none of its young people pay this much, even in services that provide very high levels of support. "I'm surprised at £800 a month. The maximum we charge is around £400 a month," she says.

High costs are being compounded by cuts to Supporting People, a billion-pound government funding stream that pays for the auxiliary costs of supported housing.

"Over the four years Supporting People has been running it has been cut by five per cent year on year and projects are being told charges made to the fund are no longer eligible such as night, security and reception staff. This means projects are now charging for these services, which is increasing rent and the amount charged through housing benefit," says Hillman.

The result is that under-18s who live independently, often because of family problems, cannot afford to work. "By and large, if they enter employment they can barely make ends meet," says Hillman.

Part of the reason is that, since young people are just starting their working life, they are usually on the minimum wage. For 16- to 18-year-olds this is just £3.40 an hour, or £516 a month working full-time at 35 hours a week. This makes no allowance for the fact the costs of independent living are no less just because you're young.

The results of these policies are seen daily at the YWCA West Kent Young Women's Centre, which provides advice and training to young women such as Cheralea. "Young people are being forced onto benefits to be able to live. Some of these hostels can be very expensive if you are working," says Fiona Palmer, the centre's senior project worker.

But it is not just the work-benefits trap that is a problem. "A lot of hostels have very heavy rules and young people go into independent living with no money management skills, so we try to do a lot around this," says Lucy Russell, policy development officer at YWCA England & Wales.

Building young people's confidence is also important, as is giving them decent advice on work and training options. "A lot of young women are encouraged to go into hairdressing or childcare. We say: 'Why don't you think about engineering or plumbing as in the long run this will pay six times more?'," says Russell.

Welfare reform

No one argues against the need for a multi-pronged approach to lifting young people out of poverty. What is less clear is how to reform the system to stop people becoming trapped. But important opportunities for reform are on the horizon.

The Department for Communities and Local Government plans to publish a housing reform green paper towards the end of the year. This will contain proposals to change funding of social housing to liberate young people from the benefits trap. In addition, the Department for Work and Pensions is conducting a review of housing benefit, which will examine whether it helps people get into work. This will build on the welfare reform green paper, which is open for consultation until 22 October. The results will feed into welfare reform legislation to be put forward in the next session of Parliament.

Organisations such as Centrepoint, the Child Poverty Action Group and Citizens Advice want the government to use these changes to end the discrimination young people face in the benefits system. For example, while claimants over 24 are assumed to need £57.45 per week to cover costs such as food, fuel and clothing, under-25s are entitled only to £45.50. They are also excluded from working tax credit.

For young people like Cheralea such changes cannot come soon enough.

THE IMPACT OF BENEFITS

- Once a young person starts earning, housing benefit tapers off quickly. Although there are a number of things that are disregarded, generally speaking after the first £5 of earnings housing benefit goes down by 85p for every pound earned

- Housing benefit in the private sector for single under-25s is restricted to the average local rent for shared accommodation, known as the single room rent. Eighty-seven per cent of all single room rent claimants face a shortfall between what they receive in housing benefit and what they pay in rent, averaging £35.14 a week

Source: Citizens Advice.