The Government’s new childcare policy discriminates against the lowest earners and will hold many single parents back from going to work, a charity has warned.
Gingerbread is concerned that the plan for childcare support under Universal Credit creates a two-tier system which leaves the lowest earners with the least support and that planned increases to the personal tax allowance will only exacerbate the issue.
The charity is urging Chancellor George Osborne to rethink the plans, which it says will discriminate against parents whose earnings are below the income tax threshold.
Gingerbread, which provides advice and practical support for single parents, said that u nder the new Universal Credit system, parents earning above the income tax threshold (due to rise to £10,000 in April) will be able to claim back 85% of childcare costs but those below it will only be able to claim 70%, meaning that, effectively, families on the lowest incomes will pay double for their childcare.
It said that with both of the Coalition parties reportedly planning to commit to further personal tax threshold rises, even more parents look set to stop paying income tax but see their childcare costs double.
The charity said that, while the average weekly wage has not increased in the last 10 years in real terms, childcare costs have risen – by as much as 37% for nursery fees for children over two.
Under the new system, a single parent with two children working 24 hours a week on the minimum wage could pay around £145 per week for a childminder. Claiming back 70% of childcare costs would see them still having to pay around £45 per week. But with 85% support from the Government the parent would only pay around £22 a week, the charity said.
Research released by Gingerbread in December saw more than half (55%) of the single parent families polled report that they ran out of money before the end of almost every month. Almost nine in 10 (87%) had borrowed money or sought emergency welfare support in the last year, with 13% taking a loan from a payday or doorstep lender. Meanwhile, 40% of single parents were behind on their bills, most often on their rent, mortgage or utility supply.
The charity is asking concerned parents to join its campaign to urge Mr Osborne to rethink the policy and commit to the additional investment in next month’s Budget.
This week sees many schools on their half-term break, leaving parents with the challenge of arranging and paying for full-time childcare, which is difficult for many two-parent families and even more so for single parents.
Kath Farrell, a single parent from east London, has twin sons. Her low income as a freelance copy editor and gardener means she would not qualify for the higher rate of support.
“I am below the tax threshold and childcare costs are a constant struggle,” she said. “It would make a huge difference for me to have my childcare costs covered at the higher rate – literally the difference between being able to take on extra work or not.”
Gingerbread chief executive Fiona Weir said: “Extra childcare support for families is very welcome – but government plans will leave the lowest earners behind and many will still struggle to afford to go out to work.
“It seems extraordinary that those who earn the least should pay more for childcare. And future increases to the tax threshold will only worsen the problem. That’s why we’re calling on the Government to give equal childcare support to all parents under universal credit.”
Gingerbread’s campaign goes live at www.gingerbread.org.uk/our-budget-for-childcare today.
A spokesman for the Department for Work and Pensions said: “The reality is that under Universal Credit parents with low incomes will face much more generous childcare support, with people working fewer than 16 hours becoming eligible for this help for the first time. This is expected to help 100,000 more families.
“We are investing an extra £200 million under Universal Credit, on top of existing spending, to cover up to 85% of childcare costs for taxpaying families. This will act as a greater cash incentive for families to increase their hours and earnings in work and if possible eventually move off benefits.
“It’s really encouraging that over a million lone parents are now in work and that the employment rate is the highest it’s ever been.”
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Charity warns over childcare policy
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