Childcare costs 'keep many in poverty' - Barnardo's

Some 18% of the UK's children are categorised as living in poverty, according to Barnardos

High childcare costs will make it "impossible" for many UK families to work their way out of poverty under new welfare reforms, a charity has warned.

A report by Barnardo's says some single parents with two pre-school children will "gain nothing" from working longer hours and could "have to pay" to do so.

The universal credit benefit system due this year will replace a number of existing working-age benefits.

Ministers said the changes would "make millions of people better off".

Children aged three and four, and many two-year-olds from the poorest families, are entitled to 15 hours of free early years education in the UK.

But in its Paying to Work report, Barnardo's - the UK's largest children's charity - suggests that parents trying to increase their hours face paying for childcare while simultaneously having their benefits reduced, and starting to pay tax.

This combination, it says, "will potentially leave some parents with very little money left over".

'Pay to work'

The report claims that a single parent with two pre-school children, who tries to work more than 15 hours a week on the national minimum wage of £6.19 an hour, will "gain nothing from working more hours".

"Lone parents with two pre-school children will potentially have to pay to go to work," it adds.

Those working more than 23 hours a week - after which national insurance is deducted - could effectively end up paying 28p per hour to work.

In London, where childcare is more expensive than average, every hour of extra work could cost a parent 91p, according to the report.

Working more than 28 hours per week, when income tax is also deducted, could cost a single parent of two pre-school children up to 72p per additional working hour.

And London-based parents will pay £1.61 per hour more than they earn if they work 28 hours or more, the charity warns.

Where a lone parent has just one pre-school child, the incentives to work longer hours are still "relatively low", the report claims. For each extra hour worked between 16 and 24 on the minimum wage, a parent will potentially gain just £1.10.

Barnardo's report comes amid a series of government pledges marking the midway point of the coalition - including a promise to help with the expense of childcare.

Speaking to BBC Radio 4's Today programme, Barnardo's chief executive Anne Marie Carrie welcomed government support on childcare costs - which she said was the "single biggest barrier to raising children out of child poverty, and to people progressing on in work".

However, she warned that changes introduced under the Universal Credit system would not help the poorest "strivers" for whom "work doesn't pay".

'Work, not hand-outs'

She also urged the government to raise the proportion of childcare costs parents could claim back from 70% to 80%.

"If we want the poorest parents to be genuinely able to work their way out of poverty, then they must be able to afford the costs of childcare. This is why we're calling on the government to provide more help to the most disadvantaged families".

Responding to the report, a spokesperson for the Department for Work and Pensions said: "Universal credit will make millions of people better off, including 700,000 lone parents.

"We're also changing the rules so that people can access childcare support when they are working only a handful of hours - around 100,000 more families will be able to take up work because of this change."

Universal credit - being introduced by Work and Pensions Secretary Iain Duncan Smith this year - aims to simplify the welfare system by replacing a number of existing working-age benefits, including the income-based jobseeker's allowance, income-related employment support allowance, housing benefit, working tax credit, child tax credit and income support.

Millions of existing claimants will be transferred onto the new system over a period of about four years, with the expectation that most people will apply for benefits and manage them online.