Credit crunched: single parents, universal credit and the struggle to make work pay

Published on 30 October 2013

Summary

Gingerbread is concerned that, far from achieving the stated aim of ‘making work pay’, many single parents will actually lose out under universal credit. This analysis, with research from the University of Essex, looks at the likely impact of universal credit on the incomes and work incentives of single parent families, compared with the current ‘legacy system’ of benefits and tax credits.

Despite a focus to encourage work, the findings show that working single parents will lose out under universal credit. The modelling looks at different options for reform; Gingerbread recommends increasing the work allowance and reducing the taper rate to maximise work incentives under universal credit.

Key findings

  • Only a third of single parents are expected to gain from universal credit; on average, single parents – whether in work or not – will lose out in cash terms
  • Working single parents will face the biggest cash losses under universal credit, compared with the current system
  • Single parents out of work looking to enter part-time work should find greater financial incentives to do so, on average
  • However, despite a pledge that universal credit will always make work way, there is little financial incentive for single parents to increase working hours beyond ‘mini-jobs’ – many will face an uphill battle to make work pay beyond 20 hours a week
  • Getting just a 5 percentage point increase in employment would generate around £436 million a year for the Exchequer.