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Childcare costs to exacerbate child poverty, warns report

10/01/2013 Joanna
Primary school teachers will have rising numbers of pupils who have already been affected by poverty in their classes unless planned welfare reforms are amended, according to a children's charity.

Universal credit, which is to be rolled out over the next four years, is intended to simplify the welfare system by replacing a number of existing working-age benefits, including child tax credit.

Children aged three and four, as well as many two-year-olds from poorer families, are also currently entitled to up to 15 hours of free early years' education per week.

Yet a new report by Barnado's, entitled 'Paying to Work' has warned that, under universal credit,  parents who try to increase their working hours will often find themselves having to pay for childcare while also having their benefits reduced and starting to pay tax.

It estimated that single parents with two pre-school age children would not benefit at all financially if they worked for more than 15 hours a week at the current minimum wage, as increased earnings would be offset by having to pay for extra childcare.

Moreover, it calculated that those working more than 23 hours a week, after which national insurance is deducted, would effectively end up paying 28p per hour to work, rising to 72p per additional working hour if they worked over 28 hours and thereby became subject to income tax.

The situation is even more severe in London, where childcare costs are more expensive than average, with every extra hour of work costing single parents of pre-school age children there 91p, climbing to £1.61 per hour after they pass the 28-hour threshold.

Chief executive Anne Marie Carrie commented: "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."

Barnado's has therefore called on the government to increase the proportion of childcare costs covered by universal credit from 70 to 80 per cent and to consider the possibility of extending the free childcare allocation from 15 to 20 hours per week.

It argued that this would have the twin advantages of supporting employment for parents and also of improving the life chances of disadvantaged young children.

Posted by Theo FouldsADNFCR-2164-ID-801519966-ADNFCR
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