Without childcare support, low-paid workers will lose out under Universal Credit

The decision to only provide help with childcare costs to those paying income tax means work will not pay for 900,000 families.

As the first pathfinder for the new Universal Credit system began in April, David Cameron tweeted: "Another major step forward on welfare reform today with the introduction of Universal Credit – this Govt is determined to make work pay".

But this goal risks being undermined by the high cost of childcare in the UK. For some families this is the difference between work paying and paying to work. New research published by the Joseph Rowntree Foundation shows that when the cost of childcare is factored in, for some parents in low-paid jobs it no longer pays to work full-time, while for others the incentive to work more hours is blunted significantly.

Take for example a couple with two young children, where the father is already working full-time on the minimum wage. If the mother takes up a minimum wage job of one and a half days a week, the family would be £23 a week better off. If she increased her hours to three days a week, they would only be £8 a week better off than when worked half the hours. And if she worked full-time the family would actually be worse off than when she worked fewer hours. In this scenario, the family’s disposable income does not increase significantly for three reasons.

First, the amount of Universal Credit received by the family is sharply withdrawn as the mothers earnings increase; second, by working more than 30 hours she is brought into income tax; and third, the more hours she works the more childcare the family needs. The cost of childcare has risen at twice the rate of inflation over the last five years, while at the same time the help with childcare costs offered to low income working families through the welfare system has been sharply reduced by this government.

But there is some relief on the horizon. In the 2013 Budget, the government announced something of a reversal, proposing to provide more help with childcare costs to working families receiving Universal Credit. But – and it’s a big but – to be eligible all adults in the household would have to be paying income tax. This would exclude those households where someone is working part-time earning the minimum wage. Looking at the working patterns of low income households at present, this policy would deliver a welcome boost to some 600,000 working families on low incomes – but 900,000 in low paid work would miss out.

The government has said it will publish a consultation on its childcare plans before parliament breaks up for its summer recess (next week). To ensure Universal Credit delivers on its goal of making sure it always pays to work, the policy needs to include something for those families that are working hard and 'doing the right thing' but not yet earning enough to pay tax. Otherwise a large number of families will remain trapped in a situation where it barely pays to work.

Katie Schmuecker is policy and research manager at the Joseph Rowntree Foundation

David Cameron during a visit to a London Early Years Foundation nursery on January 11, 2010 in London. Photograph: Getty Images.
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Donald Trump vs Barack Obama: How the inauguration speeches compared

We compared the two presidents on trade, foreign affairs and climate change – so you (really, really) don't have to.

After watching Donald Trump's inaugural address, what better way to get rid of the last few dregs of hope than by comparing what he said with Barack Obama's address from 2009? 

Both thanked the previous President, with Trump calling the Obamas "magnificent", and pledged to reform Washington, but the comparison ended there. 

Here is what each of them said: 

On American jobs

Obama:

The state of our economy calls for action, bold and swift.  And we will act, not only to create new jobs, but to lay a new foundation for growth.  We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.  We'll restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost.  We will harness the sun and the winds and the soil to fuel our cars and run our factories.  And we will transform our schools and colleges and universities to meet the demands of a new age.

Trump:

For many decades we've enriched foreign industry at the expense of American industry, subsidized the armies of other countries while allowing for the very sad depletion of our military.

One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind.

Obama had a plan for growth. Trump just blames the rest of the world...

On global warming

Obama:

With old friends and former foes, we'll work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.

Trump:

On the Middle East:

Obama:

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy. 

Trump:

We will re-enforce old alliances and form new ones and unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.

On “greatness”

Obama:

In reaffirming the greatness of our nation we understand that greatness is never a given. It must be earned.

Trump:

America will start winning again, winning like never before.

 

On trade

Obama:

This is the journey we continue today.  We remain the most prosperous, powerful nation on Earth.  Our workers are no less productive than when this crisis began.  Our minds are no less inventive, our goods and services no less needed than they were last week, or last month, or last year.  Our capacity remains undiminished.  

Trump:

We must protect our borders from the ravages of other countries making our product, stealing our companies and destroying our jobs.

Protection will lead to great prosperity and strength. I will fight for you with every breath in my body, and I will never ever let you down.

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland