Universal credit: Why 150,000 single working mums will be worse off

The charity Save the Children says that 150,000 of the country's poorest single parents will be worse off by up to £68 a week under the Coalition Government's new Universal Credit. This may mean that a quarter of a million children will be pushed further into poverty.

Save the Children is launching a new campaign in time for Mothers' Day, with the backing of Corrie's Kym Marsh and Apprentice judge Karren Brady.

Kym Marsh says, "Having been a single mum on benefits I completely understand when they say that the best chance kids have of not growing up in poverty is if their mums can work. The problem, though, is not just the cost of childcare – every mum's nightmare!! – but also that the Government's new welfare reforms coming in are going to mean work won't pay for some of the poorest mums out there. So what happens to them and their kids?"

The idea behind Universal Credit, which will be rolled out from October 2013, is that it simplifies the benefits system. Instead of claiming for a number of different benefits (like Working Tax Credit, Child Tax Credit, housing benefit and Income Support), people will claim for one basic allowance with additional elements for children, disability, housing and caring.

Universal Credit is also designed to make working worthwhile, so that you don't end up worse off if you've got a job.

This basic idea has received widespread support. The old system was inefficient and expensive to run, and it didn't seem to make sense that people could end up with less money if they were working than if they were on benefits.

Sarah Kybert, 36, has three children, aged 13, six and three. She lives in Pimlico in London and has been a single mum for two years. She was working 16 hours a week as a beauty therapist, earning £5.50 an hour, but had to stop because she couldn't make ends meet.

"You lose benefits when you work, even if it's part-time on a low wage. I couldn't afford to buy food."

But Save the Children says that the new Universal Credit may mean that the poorest working mums, earning the minimum wage, will lose out. In its new report Save the Children says that although Universal Credit may boost income for many working families, single parents working longer hours (more than 16 hours a week) on low pay will end up worse off under the new system.

As Save the Children CEO Justin Forsyth says, "Universal Credit will help some families, but mums working hard to stay above the breadline are its big blind spot. A single mum on £370 a week simply can't afford to lose £68. Mothers who want to work more to provide for their children while juggling soaring childcare and living costs should be getting more help, not less."

Universal Credit also works better, the charity says, for a couple with one main breadwinner rather than a couple with both parents working part-time on a low income. Save the Children calculates that a typical low-income couple with three children, where one parent works 24 hours a week and the other works just a few hours, could lose as much as £1,800 a year (£35 a week).

The Government seems to be aware that the new system will have winner and losers. Its own impact assessment in November last year found that while 2.8 million households would have higher entitlements under Universal Credit, 2 million households (including 1.1 million with children) would be entitled to less.

But the Department of Work and Pensions says that Save the Children is basing its criticisms on just a few extreme examples. A DWP spokeperson says, "Save the Children are wrong to assert that lone parents will lose as a result of the introduction of Universal Credit – the truth is 600,000 lone parents will be better off under a system which will incentivise work and make work pay. This is in stark contrast to the broken system this Government inherited which only rewards lone parents who work 16 hours or more. But under Universal Credit, 80,000 more families, including lone parents, will be able to claim childcare support – no matter how few hours they work."

The Department for Work and Pensions has also said that it will ensure no one will be worse off in cash terms under the new system because there will be 'transitional protection' for anyone who's entitled to less money when they move to Universal Credit. But you will only get this protection if you are currently claiming benefits and your circumstances stay exactly the same – and circumstances do, if you're a working parent, tend to change quite frequently.

With the Budget coming up next week on 21 March, Save the Children – which is launching its campaign with the charity for single parents, Gingerbread, and the national charity Daycare Trust – is asking the Chancellor George Osborne to look again at the new system to make sure that the poorest parents don't lose out.

Justin Forsyth from Save the Children says, "Too many children in this country are going without basics like hot meals or proper clothes because their parents can't earn enough. We know from other countries that supporting mums who want to work takes children out of poverty, so we need a system that offers mothers that choice.

"Unless we see movement on childcare and benefits for struggling working mums in this budget, it could be too late for hundreds of thousands of children."