Childcare, jobs and poverty

The final design for Universal Credit could make or break the Government's welfare reforms for families and for their goals on child poverty over the next few years.

Childcare is on its way to becoming a hot political issue as cuts to tax credits start to be felt and the cost of caring for children continues to rise. Save the Children and the Daycare Trust published a new survey this week suggesting that working parents in Britain are spending nearly one-third of their income on childcare.

Research into a Minimum Income Standard for the UK that the Joseph Rowntree Foundation (JRF) published in July this year confirms how much of a squeeze there is on low income working families:

• From April 2011, families need to typically earn over 20% more than they did just one year ago to achieve the same minimum standard of living. This is not just a result of cutting Childcare Tax Credits from 80 to 70% of the cost of childcare. The combined effect of other cuts or freezes to family benefits and continuing high rates of inflation have all contributed.
• A family of four with two earners and using childcare need £36,800 a year to reach the minimum standard.
• A lone parent needs £18,200 a year to reach the minimum standard of living.
• Last year, figures for families and lone parents were £29,700 and £12,500, respectively – lone parents are hit particularly badly because they lose housing benefit as their earnings requirements rise as well as tax credits.

So, in order for working poverty in general, as well as child poverty, to reduce in future, we need a much stronger focus on job quality in addition to job creation. This entails a parallel concentration on retention and progression in work as well as on welfare to work policy. This would involve stimulating better quality part-time jobs and work that is more contractually secure and better paid.

Policies and incentives are needed that allow businesses to develop their staff, create progression routes and use the skills that their staff gain. The benefits system needs to support employers in these goals for working parents, and the final design of help with childcare costs in Universal Credit could make or break the Government's welfare reforms for families and for their goals on child poverty.