Tuesday, July 16

Single parents face £1,000 love tax if they remarry or find new partner



As part of the Government’s rollout of Universal Credit, ministers promised that no one moving to the new system of benefits would see a fall in their income.

But it has now emerged that this guarantee was limited and would not apply to any claimant whose circumstances had “materially changed” once they had moved on to the new system of payments.

As a result of the exemption any single parent who moves in with a partner or gets married will have their benefits reassessed at a new less generous rate after Universal Credit is introduced from 2017.

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Research suggests that there are currently up to a million single parents who could be affected by the change – which would cost them on average £1,080 a year.

On Wednesday Liberal Democrat peers will attempt to overturn the new rules when they debate the Welfare Reform Bill in the House of Lords. Labour has tabled a separate amendment that calls for the Government to publish an impact assessment showing the levels of benefits reductions to claimants who are moving from tax credits to Universal Credit.

Speaking ahead of the vote the Liberal Democrat leader Tim Farron said that the Government proposals amounted to little more than a “tax on love” and called for the changes to be scrapped.

“The Conservatives claim they want to support two-parent families, yet their attack on Universal Credit will mean that single parents who find a new partner will actually be penalised,” he said.

“It is a tax on love. Imagine being a single parent, working on a low income, then finally finding happiness with someone and realising you’re going to lose over £1,000 as a result.

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“The Government should be supporting two-parent families, not using their change of circumstances as an excuse to cut their support. That is why they must rethink these brutal cuts to Universal Credit.”

Experts said the reason for the stark losses under Universal Credit was because George Osborne had reversed his plans for tax credit cuts that were due to take effect in April.

It means that all of the burden of the Government’s welfare cuts – which are still going ahead – will fall when Universal Credit is introduced.

“The disparity in generosity between the tax credit and Universal Credit systems risks creating huge financial penalties for people who change their circumstances – such as forming a couple – as it could trigger them losing their protection from cuts in the new benefits system,” said David Finch, Senior Economic Analyst at the Resolution Foundation think tank.

“Cuts to the work allowances in Universal Credit will weaken financial incentives to work and risk trapping single parents in short hours work. They will keep just 24p of every extra pound they earn once their work allowance has been used up and they are paying income tax.”

Alison Garnham, chief executive of Child Poverty Action Group, said Mr Osborne’s U-turn on tax credits was a “stay of execution” for families.

“As things stand the transitional protection for people who are moved from tax credits to Universal Credit look flimsy since it evaporates if there’s a change – like finding a partner or having a baby.

“So families who thought they would at least be no worse off once they are switched to Universal Credit, could in fact lose out.”

Ms Garnham added that parents who “re-partner” with another parent to make a new family could face a second penalty if plans to limit child tax credit to only two children go through.

“This surely shouldn’t pass the Government’s family test,” she said. “If ministers want to back working people and support family life they should be investing in – not cutting – Universal Credit as a springboard into jobs that families can build a future on.”

But a spokesman for the Department for Work and Pensions defended the policy. They insisted that Universal Credit was fundamentally different to tax credits and added that families who transitioned would be entitled to more generous childcare and in-work progression support.

“This kind of scaremongering completely fails to recognise those who gain significantly under Universal Credit, and the fact that claimants are moving into work faster and earning more than under the old system,” they said.