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Home Policy and campaigns Media Tax credit cuts hammer single parents
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Tax credit cuts will hammer hard-working single parents

10 March 2011

New research out today shows that single parents with two children, working full-time and paying for childcare could lose on average up to £2,000 a year when the government’s tax credit cuts take effect in April.

A report commissioned by single parent charity Gingerbread from Landman Economics (1) shows that cuts to tax credits, including cutting the proportion of childcare costs covered by tax credits from the current 80% maximum to 70%, will mean that:

  • A single parent working full-time on the minimum wage (£12,334 annual gross income), with two children and paying £300 a week or more for childcare, will lose support totalling around £1,620 a year (13% of their gross income);
  • A single parent working full-time and earning the national average wage (£25,948 annual gross income), with two children and paying £300 a week or more for childcare, will lose around £1,900 a year (7% of their income); and
  • All single parents will face a reduction in their gains to work, with an average cash loss of £492 a year for those using childcare.

Gingerbread Chief Executive Fiona Weir said:

“Single parents constantly tell us how vital help for childcare costs is in making work pay, but this new analysis shows that the forthcoming cuts will be a devastating blow on their finances. We urge the government to reverse this decision in the March Budget, or else many single parents will be facing really stark decisions about whether they can afford to remain in work”.

The report also shows that, despite the government’s drive to push more single parents back into work – with provisions in the Welfare Reform Bill to require single parents of 5 year olds to look for work from 2012 – the package of tax credit reforms will actually reduce the gains to work for all single parents. For single parents in work and paying for childcare, the average cash gain to work will be reduced by almost £500 a year from April 2011.

Fiona Weir added:

“The government is sending out really mixed messages – at the same time as introducing a Welfare Reform Bill intended to make work pay, it is actually making it harder for single parents to do so by cutting help with childcare costs and reducing the financial gains to work.

“As well as committing to long-term reform, the government must ensure that working single parents don’t lose out between now and the introduction of Universal Credit”.

Single parents who will be hit by the changes have told Gingerbread:

Louise: “It’s infuriating that the Government’s encouraging us back to work but then cutting the support that we need to make that possible. I do a bit of ironing for a tenner a week but it looks like I’m going to have to be doing a lot more of that.”

Becky: “This will be very, very hard for me. I was going to try and set up a pension but I won’t be able to afford those payments every month now. I’ve already cut down on all our non-essential spending”

-- ENDS--

Notes to Editors:

(1) The full report, Analysis of the impact of tax credit changes on working single parents, is available from the Gingerbread press office

(2) All figures quoted are in real terms (i.e allowing for inflation)

The following single parent case studies are available for interview:

Louise returned to work 6 weeks after having her daughter 11 months ago. She works 22 and a half hours a week in accounts – three full days a week. Her childcare costs are between £600-700 a month, 80% of which are currently covered by childcare tax credits.  Louise will be around £1040 per year worse off under the new system and is worried about what this will mean for her family.

“This is a huge amount of difference. Our shopping’s about £30 a week but I suppose I’d have to look at cutting that, so buying more own-brand food. I’d probably have to get another part-time job but one in the evenings so that my mum could look after my daughter as well as looking at any expenses we have – the car might have to go. It’s difficult though because the more I work the less benefits I can get so I may be better off decreasing my hours.

“It’s infuriating that the Government’s encouraging us back to work but then cutting the support that we need to make that possible. I do a bit of ironing for a tenner a week but it looks like I’m going to have to be doing a lot more of that.”

Joanne is mum to two girls, aged 2½ and 4 years. She works 16 hours a week as a hotel reservationist – two full days a week – while her daughters go to childcare.  Her weekly childcare bill is £152. Joanne’s wage is £108.80 a week.  Currently she gets 70% of her childcare costs covered by the government but this will drop to 60% from April. 

“I’ve looked at changing my hours so that I can spread them over three days , so I don’t need childcare and I can do the school run, then I could change it back over the Summer holidays so that I only pay for two days’ childcare a week.  Unless I can do that, this change means I need to cut back on absolutely everything. The children will definitely have to go without holidays and other days out and treats. They’d never go without food and clothes, but everything else will be cut back.”

“There’s no other childcare provision in the area so it’s not like I can swap to a cheaper alternative. I’ve looked into childminders and they’re even dearer - coming in at around £42 a day. I’ve been at this job for nine years and don’t really want to leave. But if push comes to shove and they can’t help by changing my hours then I will have to look for something else.  I’ve half had my eye on jobs that fit in with school but I’ve not seen a thing in term-time only.  Whatever happens though it’s going to mean upheaval for the kids”   

Becky works 28 hours a week, on a four-day week. Her three year old daughter goes to childcare for the four days. Her childcare costs are £565 a month and she receives the maximum 80% support up to the £175 per week limit. The changes mean Becky will lose over £1300 a year in support.
“This will be very, very hard for me. I was going to try and set up a pension but I won’t be able to afford those payments every month now. I’ve already cut down on all our non-essential spending so the only way to get around these costs is to try and negotiate working a shorter day, from 9.30 to 2.30, so I don’t have to use childcare at all although this will mean I work less hours and so I earn less.

“I honestly have no idea how I’m going to manage with this. I am a manager, I’m well qualified, I have 11 years’ experience – I contribute to my local economy through my skills and experience. But I feel that I’m being forced to consider giving this up. What example does this teach my daughter? It’s better to give in and have no aspirations rather than to struggle as a working mother? Either way she is likely to experience some degree of poverty, because we already cut things fine”.

Jane lives in Oldham and works 30 hours a week as a secretary earning £10,000 a year. Her two- year- old daughter Lacey goes to the local nursery at a cost of £150 a week.  Lacey’s development is delayed and Jane wants her to be in a nursery because doctors have advised that getting her to mix with other children could help bring on her speech.  The proposed changes will mean that Jane will lose around £1050 a year in her childcare support - that’s over 10% of her annual earnings.

“How do the government expect you to stay in work when suddenly you’ll have to pay all this extra money? How are we supposed to live? I have no way of finding that extra money. My mum retires in November so I suppose I could ask her to look after Lacey some days. I’m really worried though because the whole point of her going to nursery is so that her language gets better but because of this change to my money I’ll probably have to take her out of nursery and have my mum looking after her at home. Losing this money means it hardly seems worth us single parents working and I’m furious that I’d not been told about it. This will have a massive effect on my work and my daughter and yet I’ve not had a letter to even tell me it’s coming up”.



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