WIREDGOV

Many working parents with newborn children will lose more than £2,600 as a result of the Government’s flagship welfare reform, according to new analysis by Citizens Advice.

As the Coalition sets out its anti-poverty strategy this week, the charity says the design of Universal Credit will mean many new mums receiving Maternity Allowance will get much less support under the single benefit than they do now.

A single mum in work, with a second child on the way, earning £10,000 per year, will be £67 worse off per week under Universal Credit than she is with the current system.  Over the thirty-nine week period of maternity leave, this will result in a new mum who earns the anticipated National Minimum Wage of £6.50 per hour, losing £2,613.

New parents on lower incomes or in unstable employment such as zero-hours contracts, can receive Government support of Maternity Allowance for thirty-nine weeks during maternity leave. Under Universal Credit, families receiving Maternity Allowance will have its value deducted from the total amount of support they receive, leaving them financially worse off than under the current system.

The charity’s Chief Executive warns that since 2010, cuts to support for new parents like the Sure Start Maternity Grant, have outweighed welcome positive moves like extending Free School Meals and increased support for child care costs. The charity warns that the situation for new parents in low income families will get even worse under the new Universal Credit due to poor design.

Citizens Advice Chief Executive, Gillian Guy, said:

“Ministers risk leading many hard-working new families into a parent trap. Losing £67 a week will be a huge blow for a working mum struggling to make ends meet. Repeated failure to address how the new system works risks undermining Government’s aims of helping low income families and ensuring work always pays.

“Ministers have rightly prioritised reducing childcare costs, which along with housing is the biggest drain on household budgets.  Government must ensure that their reforms are properly joined-up and don’t end up working against each other, leaving new parents to pay a heavy price.

“Ministers cannot be satisfied that an easily-fixed design flaw could leave people they most want to help more than £2,600 worse off over the course of their maternity leave. Our analysis shows that one of Government’s flagship reforms is set to make life harder for many parents on low incomes at exactly the time when their household spending rockets due to the extra mouth they have to feed.

“Universal Credit has the potential to transform the welfare state for the better, but unless ministers sort out these problems, there is a risk that a well-intentioned reform will have a damaging impact on many of the families who most desperately need a helping hand.”

To incentivise work under the new system, benefits payments are slowly reduced as people's earnings increase. However when calculating the amount of Universal Credit someone is entitled to, Maternity Allowance will not be counted as 'earnings' but as 'unearned income', and will be deducted pound for pound from new parents' support payments in line with the new system's design.

Universal Credit has been rolled-out to a handful of pilot areas across the country since April 2013 to single people who have just become unemployed.  Ministers say that the new benefit will be slowly introduced to people in more complicated personal circumstances, including new parents and those with illness or disability, in the next few years, with the majority of people being moved onto the new system by 2017.

Citizens Advice

Notes to editors

1. This year the Citizens Advice service celebrates its 75th anniversary. We’ve planned a year of activity running from January to December 2014.  Contact the press office to find out more.
2. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
3. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
4. To find your local bureau in England and Wales, visit www.citizensadvice.org.uk. You can also get advice online at www.adviceguide.org.uk
5. You can get consumer advice from the Citizens Advice consumer service on 08454 04 05 06 or 08454 04 05 05 for Welsh language speakers
6. Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 6.6 million problems from April 2012 to March 2013. For full 2012/2013 service statistics see our quarterly publication Advice trends
7. Citizens Advice service staff are supported by more than 22,000 trained volunteers, working at over 3,000 service outlets across England and Wales.