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Making Universal Credit work for London - new report

Paul Treloar
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Head of Policy, LASA

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Joined: 6 January 2011

Single parents and families with two or more children in London who start work are likely to be worse off from under Universal Credit, according to research commissioned by London Councils. The organisation (representing London’s 33 local authorities) is concerned that Universal Credit may not be a sufficient incentive for unemployed parents in London to seek work because of high childcare, housing and transport costs.

They say that they support the aim of simplifying a complex benefits and tax credits system, especially as there is a much higher unemployment rate in London than elsewhere, with one fifth of London’s children living in a workless household. The research, carried out by the Centre for Social and Economic Inclusion, found that, compared with the current system, most London households will be left with less spending power under Universal Credit,  with single parents and families with two or more children hardest hit.  The only exception is parents who work less than 16 hours a week.

For example, a single parent with two children will be more than £5,000 a year worse off under universal credit if in a full time job on a minimum wage, using childcare, than under the 2011 system. Nationally a single parent in the same situation is £4,300 a year worse off. The research shows that for some income groups, adults will only be marginally better off in work rather than out of work, as childcare costs are so high. The report recommends that the universal credit calculation needs to recognise that there are different “childcare markets” across the country.  The reforms should include provision for holiday and wrap around child care. It recommends that the government considers the option of raising the overall benefit cap for London or raising the housing element of the cap for London, which is currently proposed to be a total of £500 a week.

London Councils’ Executive Member for Skills and Employment, Councillor Steve Reed said:

“Our analysis shows all London households are set to be worse off under universal credit and families with two or more children will be considerably worse off.

For a press release about the new report, and a link through to the report itself, see Making universal credit work for London