Charity claims new benefits system fails single mothers

Save the Children calls on Chancellor to change Universal Credit rules in next week's Budget

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Low paid single mothers who want to work longer hours will be worse off under the Government's plans to streamline the benefits system, according to research published today.

Despite repeated pledges by ministers to "make work pay", about 150,000 single mums in work could lose up to £68 a week under Universal Credit, which takes effect next year, says the study by Save the Children. It urges the Chancellor George Osborne to take action in next week's Budget to head off the problems and ensure that single mothers keep more of their income before losing benefits.

Mr Osborne, David Cameron, Nick Clegg and Danny Alexander – the Coalition's most powerful body known as the "Quad" – met yesterday to negotiate key Budget measures. Insiders said "good progress" was made but no final decisions taken. Another meeting will be held next Monday, two days before the Budget.

Save the Children says a typical single parent with three children, working full time on or around the minimum wage, could be £3,500 per year (£68 a week) worse off under universal credits. A single parent with two children in the same situation could be £2,500 per year (£48 a week) worse off. The result would be to push 250,000 children deeper into poverty, it warns.

The report says the new system will also hit couples where both parents work part-time on a low income. A typical couple with three children where one parent works 24 hours a week and the other works a few hours on low pay could lose as much as £1,800 a year (£35 a week).

The Government accused the charity of choosing extreme examples rather than typical cases. A Department of Work and Pensions spokesman said: "Save the Children is 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."

Yesterday, Labour urged the Chancellor to reduce tax relief on pension contributions by the rich to defuse another "time bomb" for low income families – cuts in tax credits which take effect next month.

Ed Balls, the shadow Chancellor, accused Mr Osborne of handing the top 1 per cent of earners a permanent £1.6bn tax cut by reversing Labour's plan to raise £4bn by cutting tax relief on the pensions of those earning more than £150,000 a year from 50 to 20 per cent. The proposal was scrapped by Mr Osborne, who vowed to raise the same amount in other ways. Yet research by the House of Commons Library shows that his measures raised only £2.4bn.