White Paper on Universal Credit

Written Evidence Submitted by Working Families

Summary.

· Working Families supports the direction of travel of the Universal Credit White Paper but deplores the current reductions in Working Tax Credit which undermine support for parents in work.

· Help with childcare costs is fundamental to providing parents with work incentives and Working Families’ response concentrates on this issue. Parents in the UK face high childcare costs and will not return to work without stable, quality childcare in place. There is an opportunity to radically reform how the state supports childcare costs and adequate time should be given to devise a workable system.

· Parents should not be sanctioned for failure to meet work requirements: removing money from a household with children will increase child poverty.

Introduction

1 Working Families is the UK’s leading work-life balance charity. We run a free legal helpline for parents and carers seeking advice on their employment rights and we support a network of 2000 parents of disabled children who work or wish to work. We have particular expertise in advising disadvantaged parents on the financial impact of combining working and caring. We also work with employers to deliver family friendly workplaces and disseminate good practice and we conduct research into the impact of work on family life and the business case for flexible working.

2 Working Families welcomes the Universal Credit aims of streamlining the current benefit system and making work pay. However, we are concerned that the commitment that no one will lose as a direct result of these reforms does not take account of those affected by the 2010 budget and Comprehensive Spending Review changes. While the White Paper promises that "no one will experience a reduction in the benefit they receive as a result of the introduction of Universal Credit", many people currently in receipt of Working Tax Credit will experience reduced benefits in the interim. Some people moving into work in the future may have less support in real terms than they would if they were moving into work now. The change to the childcare element of Working Tax Credit so that only 70 per cent, instead of 80 per cent, of childcare costs may be paid means some families will be up to £30 a week worse off from April 2011. The insistence that couples must work at least 24 hours a week from 2012 (instead of 16 as now) with one working at least 16 hours a week to be eligible for Working Tax Credit (WTC) will reduce the numbers eligible for WTC. Some parents - including those with disabled children - may not be able to offer more hours of work because they have heavy caring responsibilities. Others may ask but be refused by employers unable or unwilling to provide more work. These changes do not meet the aims of ensuring that work pays, and will leave poor families poorer and with less access to the support they need with childcare costs.

3 We would welcome a greater focus on poverty pay. The benefits system should not subsidise poor employers paying minimum wages. A move towards a living wage would significantly reduce the burden on the welfare budget and ensure more families were able to progress in work.

Childcare

4 Callers to Working Families’ free helpline support the view that complexity in the current benefit system provides a disincentive to work. For example, parents do not understand how much of their tax credit award is available for childcare costs, nor can they easily predict how a change in circumstances will affect their childcare support. This may deter parents from seeking more hours in work, for fear that their additional childcare costs will not be met. It is also very difficult to provide better-off calculations when parents are offered the choice of support with childcare costs through WTC and/or through employer-supported vouchers. We support the continuation of both benefits-based assistance and employer-supported vouchers and but any system must clarify for parents how vouchers and other childcare assistance interact.

5 We very much support the intention to remove the arbitrary barriers to working a certain number of hours. Some parents find it difficult to move between 15 and 16 hours of work a week and are not therefore able to access support from WTC. Childcare costs via WTC are not payable unless both parents work 16 hours per week (or one works and the other is ‘incapacitated’) and stop immediately if one parent loses their job or decreases their hours below 16. Sometimes this results in the loss of a childcare place causing disruption to the child and making it more difficult for the parent to return to work. We welcome the proposals in the White Paper to provide incentives to take jobs of only a few hours a week and to provide support with childcare costs to all parents in work, even if they work only a few hours.

6 We welcome the intention to improve carers’ opportunities to maintain links with the world of work. Any reform of Carer’s Allowance should take account of the many carers who also have responsibility for children. At present those on Carer’s Allowance are not able to obtain support with their childcare costs through WTC. A full time carer of one child or adult may well need help with childcare for other children in the family. The current earnings rule in Carer’s Allowance (which requires that carers earn no more than £100 a week) creates not only disincentives to work but also complexities because of the interaction with means-tested benefits and tax credits which have different rules. Carers face similar problems to parents in working out whether or not they are better off in work.

7 Working Families believes that the Universal Credit reforms provide a real opportunity to radically reform childcare support through the benefits system. Parents do not understand the complex WTC calculations and providers do not understand that not all parents receive the maximum amount of the childcare element. We believe that any new system should be designed around the principles of simplicity and clarity, that payments should continue to be to parents rather than providers (to reflect parental choice of childcare), payments must take account of the number of children and whether they are disabled, and that payments must provide clear work incentives, both to ensure that parents are better off in work, and to ensure that progress in work is not undermined by high additional childcare costs.

8 A new system of childcare should address the following issues in particular:

· an end to the demand that parents find 30 per cent of the childcare costs: this creates a cost burden on low income families and a complexity of calculation that is unnecessary. It would be simpler to pay all costs up to a maximum amount.

· support with childcare costs for those moving into work. It is disappointing that families can no longer receive help with childcare costs when they are training or seeking work. There is very limited support with this from Jobcentre Plus for some parents, but it does not go far enough and does not reflect parents’ real-life situations. This creates a real disincentive to work: without suitable childcare a parent will be reluctant to take on a job, but cannot afford to put their child in childcare until they receive a wage. Many providers demand upfront fees for childcare places which exacerbates the difficulties for out of work families. A temporary loss of a job can mean losing a childcare place: the benefit run-ons for four weeks go some way to alleviating this and need to be continued in any new system.

· calculations for shorter fixed periods. Requiring parents to average out their childcare costs for a year in order to maximise the help they receive is unnecessarily complex and likely to lead to under and overpayments. Costs fluctuate significantly at school holiday times and can be difficult to calculate in advance. We would welcome consideration of payments of fixed amounts for fixed periods, outside of the Universal Credit (see below). The existing, welcome provision in Working Tax Credit which allows parents to claim childcare costs for holiday periods only should continue.

· childcare for disabled children costs significantly more than for non-disabled children and this should be recognised in the support paid.

9 We are not convinced that the best method of supporting childcare payments is by including them as part of the Universal Credit. Including childcare costs as an additional element or recognising a further disregard is not easy to explain to parents, nor will it be simple to see from an award how changes in circumstances will impact on the support with childcare costs. The Universal Credit is to provide a "basic allowance" for claimants whether in or out of work. However, the current rationale for assistance with childcare costs is to support the additional costs parents face in work. It may be argued therefore that they should be kept separate. If a decision is made to keep childcare payments within the Universal Credit, we would welcome further consultations about the format of award/decision notices. Parents need to understand the amount of help that they receive because of their childcare outgoings and the difference which childcare costs make to an award.

10 Other options have been explored in the past, such as fixed payments for fixed periods according to income bands. This would have the benefit of simplicity and clarity for parents: they would clearly be able to identify how much support they would receive according to their income. We recognise that this has the difficulty of "cliff edges" as parents move between income bands and lose entitlement to support with childcare costs. However, if work is always to pay, the impact of these could be minimised by ensuring the amount lost was significantly more than compensated for by the income gained.

11 We hope that the Universal Credit will continue the current system of, ensuring as far as possible that the main carer receives both Child Benefit and means-tested help for the children, unless a couple have agreed otherwise.

Sanctions

12 Working Families is disappointed that parents whose youngest child is five will need to actively seek work or risk sanctions. A five year old child may need considerable time settling into school and parental support is vital at this time. Working Families is opposed to any financial sanctions where children are involved. Sanctioning a parent for failure to meet a requirement to prepare for work will result in hardship for the whole family: children will be made poorer through no fault of their own. Conditionality is unnecessarily punitive in circumstances where the search for jobs may be futile: few jobs are currently advertised on a part time or flexible basis, and those that are may be for very low pay with little prospect of advancement.

13 It should be a matter for the parents, not the Jobcentre Plus adviser, to determine how much work is appropriate for a family with children. Parents who would prefer to look after their children themselves should not be forced into low paid jobs that simply cover the costs of someone else caring for their child. Many low paid jobs are not offered flexibly and some employers are unwilling to accommodate parents’ requests to spend time with their children. We welcome the recognition in the current system that lone parents of younger children should be able to restrict job searches to school hours, and that a lack of appropriate childcare should be considered a good reason to refuse a job. These principles should be expanded in any new system: parents of teenagers may want to work only school hours to be able to guide and support their children through exams or difficult times.

14 Parents should also be excluded from the mandatory work activity plans: requiring parents to attend full time employment for four weeks or face a loss of Jobseeker’s Allowance for three months is unjust and unreasonable. Few parents out of work would have childcare available and the full time work requirement runs counter to the other positive statements about encouraging mini-jobs and few hours of work where claimants have other responsibilities.

Delivery and distribution

15 We welcome a streamlined approach and online accounts for Universal Credit payments where possible. However, some claimants will still need additional support to complete claims and do not have access to the internet. Families for whom English is not their first language, disabled people and vulnerable groups will need personal advice from individuals to understand how to claim and what their award means.

16 We support the provisions in the White Paper that ensure that workers will be able to work the number of hours that suits their needs and those of their employer. While "part time jobs and flexible working are much more common than they once were", nevertheless the Government needs to place an emphasis on flexible job creation if the potential benefits of this reform are to be realised. For many parents on benefits, the flexible jobs available do not offer decent wages or the prospect of advancement. Poor quality part time work contributes to parents cycling in and out of work. All jobs should be advertised on a flexible or part time basis, unless there is a sound business reason why not. Jobcentre Plus should ensure that family-friendly hours have been considered for all vacancies that they advertise. Only then will a move into work ensure that parents are "better off" both in terms of immediate increases in income and in terms of prospects of moving out of poverty over the long term.

December 2010