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Universal Credit: Does it really add up?

Universal Credit, does it add up?
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The UK is awash with cases of single parents effectively punished for choosing to work, and with the age threshold for children of single parents wanting to claim income support now lowered to just 5 years old, an alternative system can’t be introduced quickly enough for many struggling single parent families. The current administration clearly felt the same way; hence the introduction of 2012’s Welfare Reform Act – which paved the way for Iain Duncan Smith’s Universal Credit System.

So: Has the self-styled Quiet Man of British politics got it right?

Is the idea is that single parents will be unequivocally better off in work really true?

Under the new scheme, Income Support, Job Seekers Allowance, Employment Support Allowance, Housing Benefit, Working Tax Credits and Child Tax Credits will all be replaced by the Universal Credit – designed to encourage parents to work and cap benefits at £26,000 per year. The system will be introduced in 3 phases starting in October of this year and is planned to conclude in December 2017. Universal credits will be means tested, with the theory that when a family’s income falls below a certain level, it will be topped up by the Universal Credit and then when your wage goes up, the Universal Credit goes down. Whilst the government claim that single working parents will be better off after the changes, the reality is that many families will find their benefits being greatly reduced – especially those who have several children.

Universal Credit- One size fits all?

In a recent report by Donald Hirsch, he claimed that the way in which this system is designed will leave many families hitting a ‘financial plateau’, where the cost of child care outweighs the benefits of working longer hours. If you take a single parent with a 1 year old child, working 10 hours on minimum wage, they would look to significantly gain by the new system. However, every hour after that, they would only gain £1.50 due to National Insurance and higher taxes. This would then be further reduced to 50p when you take into account the cost of childcare. For many single parents, working longer hours simply won’t add up.

Could lone parents be pushed into poverty with the new system?

The charity Save the Children is concerned that the introduction of this new system could force 150,000 of the poorest lone parents, further into poverty. Yet according to the Department for Work and Pensions, “Universal Credits will make millions of people better off” … “an extra £300 million will be spent on childcare support so that more families will be able to take up jobs and we’re changing rules so that people can access childcare support from their first hour of work – a move that will clearly benefit lone parents”. The DWP have acknowledged that the rising cost of child care is a serious issue and are looking to find suitable solutions to this problem – but as costs differ greatly around the country, there is concern that parents in the London area could be further disadvantaged, despite the government advising they are looking into regional variations to offset additional costs.

Universal Credit

Ultimately, there may not be the perfect system to help encourage parents to work whilst at the same time supporting the poorest families. Regardless of what systems may be in place, getting the balance right between being a working, contributory member of society and being a good parent is a moral dilemma that many of us will face every day, tugging on both our heart strings and purse strings for years to come as our society evolves.

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About Rebecca Robinson

About Rebecca Robinson

After spending the last 8 years juggling life as a mum of two, wife and working full time as a Project Manager for a global telecommunications company, Rebecca Robinson made the decision to follow her love of writing and took the plunge; turning her passion into a full time career. Since becoming a full time writer, Rebecca has worked with various media and copy-writing companies and with the ability to make any topic relevant and interesting to the reader, now contributes to The Working Parent on articles ranging from credit cards to teenage relationships. Ever the optimist, Rebecca's dreams for the future include a house in the country filled with children, dogs and horses in the field!

Website: Rebecca Robinson

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