Lone parents hit by childcare costs

Coins on noteHigh childcare costs will prevent many single parents trying to work their way out of poverty under the Government's welfare reforms, a children's charity has warned.

Lone parents with two pre-school age children will be no better off and could even be worse off if they increased their working hours at the minimum wage beyond 15 a week, Barnardo's claimed.

Some could effectively end up paying 72p per hour to go to work, a figure that would rise to £1.61 in London where childcare is more expensive, it said in a report.

The Universal Credit being introduced by Work and Pensions Secretary Iain Duncan Smith is designed to simplify the benefits system and ensure that it always pays to work.

But the Barnardo's report argued that it would be impossible for some lone parents to "strive" their way out of poverty by working more than 15 hours a week - the amount of free early years education provided for three and four-year-olds.

For parents taking on more than 15 hours a week, the withdrawal of benefits and the costs of childcare - even despite 70% being met by the state - would mean they would gain nothing for additional working.

Those working more than 23 hours, after which national insurance kicks in, would lose out by 28p per hour, the report said. After 28 hours, income tax is deducted, meaning it would cost 72p per additional working hour.

Barnardo's urged the Government to increase the proportion of childcare costs covered through Universal Credit from 70% to 80% to remove the disincentive. Coalition ministers are expected to announce extra help for families struggling to meet childcare costs, as part of the Government's mid-term review.

Chief executive Anne Marie Carrie said: "The Government's claim that work will pay for the UK's most disadvantaged families under Universal Credit is simply wrong. Leaving the poorest without sufficient means to pay for childcare ironically risks pricing precisely those families who are in greatest need of the extra income out of work."

A Department for Work and Pensions spokeswoman said: "Universal Credit will make millions of people better off, including 700,000 lone parents. We're also changing the rules so that people can access childcare support when they are working only a handful of hours - around 100,000 more families will be able to take up work because of this change."