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First, the amount of Universal Credit received by the family is sharply withdrawn as the mothers earnings increase; second, by working more than 30 hours she is brought into income tax; and third, the more hours she works the more childcare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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Five things we've learned from Labour conference

The party won't split, Corbynite divisions are growing and MPs have accepted Brexit. 

Labour won't split anytime soon

For months, in anticipation of Jeremy Corbyn’s re-election, the media had speculated about the possibility of a Labour split. But the party’s conference confirmed that MPs have no intention of pursuing this course (as I had long written). They are tribally loyal to Labour and fear that a split would prove electorally ruinous under first-past-the-post. Many still expect Theresa May to hold an early general election and are focused on retaining their seats.

Rather than splitting, Corbyn’s opponents will increase their level of internal organisation in a manner reminiscent of the left’s Socialist Campaign Group. The “shadow shadow cabinet” will assert itself through backbench policy committees and, potentially, a new body (such as the proposed “2020 group”). Their aim is to promote an alternative direction for Labour and to produce the ideas and organisation that future success would depend on.

MPs do not dismiss the possibility of a split if their “hand is forced” through a wave of deselections or if the left achieves permanent control of the party. But they expect Labour to fight the next election as a force at least united in name.

Neither the Corbynites nor the rebels have ultimate control 

Corbyn’s second landslide victory confirmed the left’s dominance among the membership. He increased his winning margin and triumphed in every section. But beyond this, the left’s position is far more tenuous.

The addition of Scottish and Welsh representatives to the National Executive Committee handed Corbyn’s opponents control of Labour’s ruling body. Any hope of radically reshaping the party’s rule book has ended.

For weeks, Corbyn’s allies have spoken of their desire to remove general secretary Iain McNicol and deputy leader Tom Watson. But the former is now safe in his position, while the latter has been strengthened by his rapturously received speech.

Were Corbyn to eventually resign or be defeated, another left candidate (such as John McDonnell) would struggle to make the ballot. Nominations from 15 per cent of MPs are required but just six per cent are committed Corbynites (though selection contests and seat losses could aid their cause). It’s for this reason that allies of the leader are pushing for the threshold to be reduced to five per cent. Unless they succeed, the hard-left’s dominance is from assured. Were an alternative candidate, such as Clive Lewis or Angela Rayner, to succeed it would only be by offering themselves as a softer alternative.

Corbynite divisions are intensifying 

The divide between Corbyn’s supporters and opponents has recently monopolised attention. But the conference showed why divisions among the former should be interrogated.

Shadow defence secretary Clive Lewis, an early Corbyn backer, was enraged when his speech was amended to exclude a line announcing that Labour’s pro-Trident stance would not be reversed. Though Lewis opposes renewal, he regards unilateralism as an obstacle to unifying the party around a left economic programme. The longer Corbyn remains leader, the greater the tension between pragmatism and radicalism will become. Lewis may have alienated CND but he has improved his standing among MPs, some of whom hail him as a bridge between the hard and soft left.

Elsewhere, the briefing against McDonnell by Corbyn allies, who suggested he was an obstacle to recruiting frontbenchers, showed how tensions between their respective teams will remain a story.

Labour has accepted Brexit

Ninety four per cent of Labour MPs backed the Remain campaign during the EU referendum. But by a similar margin, they have accepted the Leave vote. Jeremy Corbyn and John McDonnell, both long-standing eurosceptics, confirmed that they would not seek to prevent Brexit.

Owen Smith called for a referendum on the eventual deal during his leadership campaign. But with some exceptions, such as Angela Eagle, most of his backers have rejected the idea. Though 48 per cent of the electorate voted Remain, MPs emphasise that only 35 per cent of constituencies did. Some still fear an SNP-style surge for Ukip if Labour seeks to overturn the outcome.

The debate has moved to Britain’s future relationship with Europe, most notably the degree of free movement. For Labour, like Theresa May, Brexit means Brexit.

Corbyn will not condemn deselections 

The Labour leader could have won credit from MPs by unambiguously condemning deselection attempts. But repeatedly invited to do so, he refused. Corbyn instead defended local parties’ rights and stated that the “vast majority” of MPs had nothing to fear (a line hardly reassuring to those who do). Angela Eagle, Stella Creasy and Peter Kyle are among the rebels targeted by activists.

Corbyn can reasonably point out that the rules remain the same as under previous leaders. MPs who lose trigger ballots of their local branches face a full and open selection. But Labour’s intensified divisions mean deselection has become a far greater threat. MPs fear that Corbyn relishes the opportunity to remake the parliamentary party in his own images.  And some of the leader’s allies hope to ease the process by reviving mandatory reselection. Unless Corbyn changes his line, the issue will spark continual conflict. 

George Eaton is political editor of the New Statesman.