CAB evidence briefing October 2008

Barriers to workLone parents and the challenges of workingSummary

As part of its drive to end child poverty by 2020, the Government aims to encourage 300,000more lone parents into work. A number of questions arise, however, about the measures thatthis Government is taking to achieve that goal: Are they appropriate? Will they be effective?What could be done differently? This report looks at these questions from the perspective oflone parents who use CAB services.

Lone parents face multiple barriers when they try to move from benefits to work. Employers areoften reluctant to take on lone parents – and lone parents themselves worry about combiningwork with their childcare responsibilities. Financial stability is vital, but is often hard to achieve:some lone parents moving into low-paid jobs find they are simply worse off in work than livingon benefits. The complexity of the combined benefits and tax credit systems makes it verydifficult for others to manage. Keeping a roof over the family’s head is equally critical, buthousing often comes under threat as income levels fluctuate. As well as the financial issues,single parents face significant problems with juggling family needs by themselves, especiallyfinding affordable, good quality childcare.

Since 1997, the Government has been promoting work as the best form of welfare, but hasalso moved gradually from the use of incentives to sanctions. Citizens Advice argues thateffective support for lone parents lies in breaking down the barriers to work: re-organising thetax and welfare systems to reward work; ensuring appropriate childcare; and working withemployers to enable them to provide flexible jobs.

Both the Work and Pensions and the Treasury Select Committees have recently highlighted theproblems for low income households caused by the complexity of the benefits, tax and taxcredit systems. Both committees have recommended a wholesale review of these systems. Ourcentral recommendation in this report is that the Government should set up a Welfareand Poverty Commission to examine the interaction of the benefits, tax credit and taxsystems, in order to minimise complexity and to ensure that work pays.

�� Introduction Page 2

�� Barriers to work – our findings Page 4

�� Breaking down the barriers – conclusions and recommendations Page 24

�� Annex A: Key Jobcentre Plus employment support for lone parents Page 25

Inside

Introduction

The Government has pledged to halve childpoverty by 2010, and eliminate it by 2020.However, it is behind in achieving its targets,having failed to reduce the number of childrenin poverty by a quarter between 1998/99 and2004/05. Child poverty figures actually rosebetween 2003/04 and 2006/07 to a currentlevel of 3.9 million on an after housing costsmeasure and 2.9 million before housingcosts1.

Around half of these children live inhouseholds where there is no adult in work –1.4 million on a before housing costs measurein 2005/06. The Government has thereforeconcentrated considerable resources onincreasing employment rates across thepopulation since 1997. Two thirds of theseworkless households are headed by a loneparent2. There are nearly two million loneparents in Britain today, caring for 3.1 millionchildren, and making up 25 per cent of Britishfamilies3. Around one million are in work and750,000 are out of work also claiming incomesupport4.

Targeted programmes such as New Deal forLone Parents (NDLP) have been developed toraise the employment rate of lone parents,which has increased from 45 per cent in 1996to 56 per cent. The Government has stated afurther target of 70 per cent employmentamong lone parents, against a goal of 80 percent national employment, that is 300,000more lone parents should be moving intowork.

Until now, lone parent employment rates havebeen increased by encouraging parents totake part in voluntary programmes such asNDLP, and by providing significant boosts toincome for those who work, through the taxcredit system. Compulsion has been limited toattending work-focused interviews atincreasing frequencies.

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The rise in lone parent employment rates isnow slowing down, and at the same time, theGovernment’s approach has moved towardsgreater conditionality. In 2005 theGovernment proposed a financial incentive toencourage lone parents to participate in work-related activity, but in 2007 they proposedthat lone parents will be expected to look forwork when their youngest child is seven andwork related activities will be necessary toreceive benefits. From 2010 lone parentswhose youngest child is seven will have toapply for Jobseekers Allowance (JSA), which,unlike income support, involves a compulsoryrequirement to seek work. The 2008 WelfareGreen Paper, No-One Written Off, adds aproposal that lone parents should undergo askills assessment when the youngest child isfive. Annex A lists current and proposedmeasures designed to support lone parents inseeking and sustaining work, which are basedon a combination of encouragement andenforcement.

Attempts to encourage work through financialincentives have contributed to increasing thecomplexity of the welfare system. Tax creditshave largely achieved their goal of makingwork pay but have undoubtedly addedcomplexity for claimants and administratorsalike, because they are administered by adifferent Government department and undercompletely different rules from benefits.

The need to address this complexity is nowwidely recognised. The House of CommonsWork and Pensions Committee’s inquiry into‘Benefit Simplification’ concluded that‘Without a wholesale review of all benefits,and tax credits, their interactions andidiosyncrasies, meaningful simplification willnever be achieved’. They recommended thesetting up of a Welfare Commission to take aholistic look at the way forward for simplifyingthe benefit system5.

1 On a before housing costs measure, Department of Work and Pensions (DWP), HBAI stats 2005/06, April 20072 Ending Child Poverty, Everybody’s business, DWP, DCSF, HM Treasury, March 20083 Poverty and Inequality in the UK: 2008, Brewer, M; Muriel, A; Phillips, D; and Sibieta, L. The Institute of Fiscal Studies (IFS)4 DWP statistics, November 2007, No-one Written Off, July 20085 Benefit Simplification: Seventh Report of Session 2006–07, House of Commons Work and Pensions Committee, July 2007

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In response to concerns about the impact ofthe abolition of the 10p tax rate, the TreasuryCommittee came to a similar conclusion,recommending a Poverty Commission to lookat all policy areas relating to poverty. Thiswould include the overall functioning of thepersonal taxation system, the benefits systemand the tax credit system6.

Is increasing conditionality necessary?

We believe that the NDLP programme hasbeen successful because it has been voluntary,and parents have been encouraged toparticipate when they feel ready and able todo so. The Government argues, however, thatsanctions are necessary to ensure thatclaimants take up the offer of support toreturn to work. In a recent research paper itpoints out that one third of lone parentsfound that the mandatory work-focusedinterviews were ‘positively motivating’, butthat ‘the impact was more limited on thosenot wishing to work’7.

Other DWP research shows that the currentsanctions regime has not helped people getproper advice and information on work andtraining opportunities, but has increased stressand poverty. It also found that the system isnot applied consistently: while the loneparents interviewed appeared to understandthat in theory their benefits would be cut ifthey failed to attend an interview, they alsofound that many who had been sanctionedweren’t aware of it and others who hadmissed interviews weren’t sanctioned8.

CAB advisers reported seeing lone parentsstruggling to live on reduced benefit with noidea why their money had been cut, and laterdiscovering that a benefit sanction had beenapplied in error. For example:

A CAB adviser found that her client hadbeen living on reduced income supportfor three years. Jobcentre Plus said that

she had been sanctioned in June 2004,and that her failure to attend a work-focused interview in April 2007 hadmeant that the sanction remained inplace. The client said she’d alwaysattended her interviews and was able toprovide names of the personal advisersshe had seen. The CAB advisercommented that for this woman theregime of work-focused interviews andsanctions had only led to debt, stressand anxiety, and affected her ability toprovide for her son.

There are legitimate reasons why lone parentsmay not wish to work. One Parent Familiespoints out that 66 per cent of lone parentswith children over 11 are currently in work,which suggests that there is a naturaltendency for lone parents to move into workwhen their children are old enough. They alsopoint out that amongst lone parents claimingincome support, many would be unable totake up employment due to othercircumstances, for example, half have a healthcondition or disability, and a quarter are caringfor a disabled child9.

Lone parents tell us about the barriers theyface to taking up work, including lack offlexibility on the part of employers, lack ofaffordable childcare, fear that they will notgenuinely be better off, and concern aboutthe effectiveness of the benefits and taxcredits systems. This report discusses thesebarriers to work and urges the Governmentto ensure that they focus as much policyattention on removing the barriers, tointroduce new benefit rules and conditionsfor lone parents.

Our evidence base

The Citizens Advice network provides adviceand information from over 3,000 adviceoutlets across England and Wales. Weestimate that in 2007/08, we advised 106,000

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6 Budget Measures and Low–Income Households, Thirteenth Report of Session 2007–08, Treasury Committee, HC 326, June 20087 More support, higher expectations: the role of conditionality in improving employment outcomes, DWP, July 20088 Sanctions: Qualitative summary report on lone parent customers, Joyce, L; Whiting, K, DWP Working Paper 27, 20069 One Parent Families website: oneparentfamilies.org.uk, Lone parents and employment conditionality

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lone parents on 300,000 benefit and taxcredit advice issues. Around 22 per cent ofdebt enquiries to bureaux came from loneparents, which amounts to some 374,000debt issues; advice to lone parents accountsfor around nine per cent of all ouremployment advice which adds up to around43,000 issues. Twenty-eight per cent of allCAB advice on tax credits, housing benefitand income support was given to loneparents. Given that only seven percent of UKhouseholds are lone parents, these figuresshow that lone parents make up a significantproportion of CAB clients.

This report draws on the experience of ouradvice work, case reports submitted bybureaux throughout England and Wales, anda number of in-depth interviews conductedwith clients of CAB outreaches, workingparticularly with lone parents or specific blackand ethnic minority communities.Questionnaires were used to captureinformation from people from worklesshouseholds, both via CAB services in SureStart projects and from lone parentsparticipating in financial literacy courses runby Horizons projects – a partnership funded byBarclaycard, providing financial literacytraining to lone parents.

Twenty-eight in-depth interviews wereconducted in the West Midlands and Londonwith lone parents and people from black andminority ethnic groups during September andOctober 2007. Interviews were short, withopen-ended questions about how theymanaged, whether they were looking forwork and what, if any, difficulties theythought they faced.

� Eleven interviews were held with loneparents, one of whom was a man; plustwo with women who had disabledpartners; one with a woman who wasmarried with a working partner; and onewith a couple, both of whom were out ofwork, giving a total of 15 interviewsaltogether.

� Six interviews were conducted withVietnamese, Cantonese and Somali clientsin London.

� Additional information was gathered from33 questionnaires from Sure Startoutreaches and Horizons projects. Thequestions asked how parents felt aboutmoving into work, specifically, what wouldbe their main concerns when thinkingabout moving into work and what wouldbe most helpful to them.

Barriers to work – our findings

Evidence from the interviews andquestionnaires highlighted the following keybarriers for this group in entering the labourmarket:

1. Inflexible jobs and employers.

2. Lack of access to affordable childcare.

3. Lack of tailored support in making thetransition to sustainable work.

4. Being financially worse off in work than onbenefits.

5. Inflexibility of the benefit system andmoney problems.

1. Inflexible jobs and employers

Knowing whether their employer would beflexible when their child was ill was the mostcommon worry reported by questionnairerespondents. Having this concern resolved wasone of the main things respondents believedwould enable them to start work.

“I’m not worried about what kind of jobI get as long as my employer is going tounderstand that I have two kids to bringup myself and I can only do so manyhours.” Lone father with twodependent children.

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Others talked about how they felt employerswere unwilling to take them on because ofthe time they had been out of the labourmarket.

“They [Jobcentre Plus] want us back towork but employers don’t want usbecause we’ve been out of work for solong and in theory don’t know whatwe’re doing anymore. I’m hopeful formore interviews and I’ve done moreapplication forms and sent out my CVand am waiting on those. It’s verydisheartening, everyone wants someonequalified in some way. To get back intowork means you’ve got to do some formof training in some area.” Lone parentwith two teenage dependentchildren.

The Government’s local employmentpartnerships scheme engages employers whoare willing to work with groups oftenoverlooked in the labour market, includinglone parents. The scheme includes work-focused seminars and a guaranteed interviewfor those ready to work. It is still the case,however, that lone parents who have beenout of the labour market for a long time aremore likely to move into low skilled and lowpaid work. The interviews revealed muchabout the quality of low paid jobs and thefailure of employers to meet their statutoryobligations. Low paid jobs often offer the leastflexible arrangements for employees. In factmany require unreasonable flexibility fromemployees – in terms of working varying shiftpatterns at short notice. CAB evidence findsthat many employers fail even in theirstatutory duties to provide sick or holiday pay,while others even overtly suggest that theyprefer not to employ lone parents.

A lone parent of a 16 year-old in fulltime education was working 20 hours ina bar. She worked from 12-4pm eachday which meant she could be homewhen her son came home from school.After eight months of being paid less

than the minimum wage, she called theenforcement helpline which resulted inan increase up to the minimum rate. Shedidn’t receive any back-pay and whenshe asked for it, her employer guessedthat she was responsible for the contactfrom the enforcement officer. Afterinitially asking her to sign to say she’dreceived the money – when she hadn’t –he paid. The client felt that her employerthen began to treat her differently whichincluded changing her shifts withoutnegotiation or warning. The proposednew hours were later and didn’t fit withher responsibilities for her child.

A lone parent helped by aWorcestershire CAB was worried abouther income support and housing benefitafter being sacked after just three weeksin telesales work. Her employer told hershe wasn’t wanted as she wasn’t sellingenough. She had only been paid £4 anhour, despite minimum wage forsomeone aged 20 being £4.60. She hadbeen paid by cheque, had no pay slipand no written contract. She hadworked for 12 hours, 15 hours andanother 12 hours within the three weeksbefore leaving. Her income support wasstopped and she was told it would takethree weeks to reinstate.

We therefore welcome plans to extend theright to request flexible working to parentswith children under 16 years. We alsoacknowledge the success of the LocalEmployment Partnership scheme, but questionhow many smaller employers will want to signup to it.

We also welcome the Government’s recentcampaign to raise awareness of the nationalminimum wage – they report that theirpromotion led to a 400 per cent increase incalls to the helpline. We would like to seesimilar attention given to promotingawareness of wider employment rights andthis should be seen as part of the strategy for

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tackling child poverty. We thereforewelcome the recommendations in thereport by the BERR vulnerable workerenforcement forum to raise awarenessof basic employment rights through anationwide campaign10.

The DWP and Jobcentre Plus could play a role:Jobcentre Plus personal advisers should allreceive training on employment rightsand these rights should be covered ingroup work preparation sessions.

We would like to see the DWP and theDepartment for Business, Enterprise andRegulatory Reform (BERR) produce a jointleaflet on employment rights, coveringadvice on what to do if an employerdenies an employee their fundamentalrights. Leaflets should be given out toclients completing Jobseeker’s Agreementsand at work-focused interviews.

Where personal advisers or JSA fortnightlyreview officers become aware ofemployers who are failing to comply withthe minimum wage, they should routinelyreport them for investigation by theEnforcement Agency.

Citizens Advice has argued for many years fora Fair Employment Agency11 to ensure that allworkers are able to benefit from the range ofemployment rights introduced by thisGovernment. Like the Minimum WageEnforcement Agency, the Fair EmploymentAgency would have the powers toinvestigate, inspect and enforcecompliance, removing some of the burdenon enforcement from vulnerable workersthemselves.

2. Lack of access to affordable childcare

Caring responsibilities were one of the mainproblems identified by interviewees andquestionnaire respondents. The followingproblems with childcare were highlighted:

� Childcare facilities were not open at thehours needed.

� Flexible working hours made committingto a childcare place difficult.

� Difficulty of long travel to differentchildminders before and after work wasexperienced.

� School club not taking all the family,necessitating use of many centres.

� Long school holidays seen as a majorproblem by virtually all.

� Deterred from claiming for help withchildcare through tax credits becausethey were paid in arrears and becauseof previous delays with HM Revenue andCustoms (HMRC).

Being able to get advice about and help withchildcare was the second most commonresponse to the question about what wouldhelp most in considering work.

“If the supermarket offered me a jobaround school holidays, I would go for it– that would be brilliant. Some jobs youhave to work on Saturday. At Asda it’sone Saturday in every three and if you’rea single parent, there are child careissues. They cannot necessarily go totheir father for the day.” Intervieweewith three school age children.

“…you are always asking favours, timeoff or you can’t work this and it isdifficult. A few times I had to work Bankholidays, and childminders don’t workBank Holidays and I had to drive25 miles to my father and there againafterwards to pick them up. If I didn’tdrive I couldn’t have worked. I was verytired. The quality of time spent with thechildren was limited.” Interviewee withfour children.

It was clear that those best able to workaround the difficulties of childcare were thosewho had support from family and friends.

10 Vulnerable Workers Enforcement Forum final report and Government conclusions, BERR, August 200811 Somewhere to turn, Citizens Advice, 2004 and Rooting out the Rogues, December 2007

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A lone parent who works at a familycentre on two days, a shop oneafternoon, and runs a holiday clubMonday-Friday every day of the holidayssaid: “I wouldn’t be able to work at all ifit wasn’t for family and friends.” Herchildren are at school and if she cannotbe there for them, she says: “If it’s amorning, I ask my mum and dad and ifit’s an evening, I generally ask myfriend.”

“My child goes to a childminder onTuesdays and Thursdays from2.30-4.30pm and my mum [with whomshe lives] looks after him in the eveningsand at the weekends.” Intervieweewith one child.

Getting childcare at short notice or forvariable hours is very difficult. Where it isavailable, it is very expensive. One clientreported that her hours meant that she had touse very expensive childcare agencies that cost£400 a week. For lower paid workers thesecosts would simply be prohibitive.

It matters how childcare costs are paid: somefound that paying them up-front riskedputting them in debt regularly until their taxcredits arrived. One woman spoke of wantingto work full-time but that would mean havingto sort out childcare which she felt was a bigfinancial risk.

“I’m managing my money each weekbecause everything comes in and out ona weekly basis, so I know where I am. Ibarely manage and if things go wrong,I’m in a mess and I just couldn’t copewith late payment of childcare. I managemy affairs to control my debt and notallow it to get worse. I am in debt anddon’t like it. I never was before I was asingle parent.” Interviewee.

“A friend of mind is a childminder andshe closes at 6.00pm. I’m not alwaysfinished by then and anyway the cost is

prohibitive. I am on basic minimumhourly rate and I would spend nearlytwo thirds of what I earn on care whichdoesn’t make it worthwhile.” Thisinterviewee went on to say that shedidn’t feel that claiming help from taxcredits would help as she would stillhave to pay costs up-front and her costswere very variable.

The Childcare Act 2006 (section 6) obligeslocal authorities in England and Wales toprovide sufficient childcare to meet the needsof working parents, with particular regard tothe needs of lower income working families,from April 2008. Until this is implemented,lack of affordable childcare is still a significantbarrier to work. The Daycare Trust’s 2008childcare costs survey found that parentscontinue to face increasingly high costs fornurseries, childminders and out-of-schoolclubs. In England the cost of a typical nurseryplace for a two year-old has increased at morethan twice the rate of inflation to £159 perweek, and in Wales by four times the inflationrate, to £142 per week12.

We support the Daycare Trust’s recentrecommendations to improve access toappropriate and affordable childcare by:

� Expanding free places for two, threeand four year-olds to at least 20 hoursa week, for 48 weeks in the year, andby subsidising out-of-school activitiesfor all 11-14 year-olds and for youngerchildren from lower income families,aiming ultimately to make them freeof charge.

� Tackling the affordability crisis bygiving local authorities the means todevelop sustainable services in poorerareas and provide free places for thosemissing out, including places fordisabled children, parents needingout-of-hours care, Further Educationstudents and parents of under-threeswho want to train.

Barriers to work

12 Childcare Costs in 2008, Daycare Trust website, daycaretrust.org.uk

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3. Lack of tailored support in making thetransition to sustainable work

Our evidence highlighted that when loneparents move into work, they need:

� tailored help in finding the right work ortraining;

� support to make that transition, bothbefore and afterwards; and

� comprehensive advice on their financialposition in work.

In April-May 2008, Jobcentre Plus saw158,698 lone parents for work-focusedinterviews13. Some of the lone parentsinterviewed, felt that personal advisers werelimited by process, rather than delivering agenuinely personal service when they neededit. The advisers did not have the time in theinterviews, nor the flexibility outside theschedule, to provide the personalised supportneeded to help parents move into work aftera long period away from the labour market.

A lone parent with two teenage childrenspoke of her frustration in trying to gethelp from her personal adviser to moveinto full time work. For the 18 yearswhilst her children had been growing upshe had mostly worked a few hours aweek. She had even come off benefitsfor a while but when one of her childrengot into trouble at school, she found sheneeded to prioritise spending more timeat home. She’d never had to go for aninterview and realised she really neededhelp. “It’s a deterrent but more so if, likeme, you’re out of a ‘proper’ job for along time, trying to get back in, you’renot confident, you don’t know whatyou’re doing any more, so it’s likestarting again, being a different person.But if you don’t know where to start andthey’re not giving you help … you won’tmove forward. I do feel I’m beingpushed aside and it doesn’t matter.There’s a world of help out there, ‘we’llhelp, we’ve even got money to give you

help’ but you can’t get in there, theydon’t want to know, unless it’s on thecomputer (the next programmedinterview date with the personal adviser),they don’t want to know. If you want tosee them, they are not there, they don’twant to help you. ”

Another client complained that she felt herpersonal adviser saw supermarket work as herbest option.

“He just scrolls through and says, ‘youdon’t want to do that and you can’t dothat … we’ve got nothing for you’. Youcan’t read what’s on the screen becausehe’s scrolling through that fast andwhether you would consider having thejob that he’s dismissing. I’m not sayingthey’re all like that. They seem not tohave a clue and don’t know what I’mqualified for. He seems to have got mepegged for shelf filling in supermarketsand didn’t consider anything else – hisdecision, not mine.” Lone parent ofteenage children looking for fulltime work.

It is essential that personal advisers aretrained to tailor the support they offerindividuals, and are given the time to beflexible.

CAB evidence highlights the limitations of thecurrent New Deal programmes in supportingthe specific needs of jobseekers. Some CABclients keen to move into sustainable workand actually engaged in work-related activitiesfelt that intervention from Jobcentre Plus wascounterproductive, as it was not sufficientlyflexible.

One couple interviewed were both outof work. The man had been maderedundant and problems adjusting to thewoman’s part-time earnings resulted inher leaving work too. He had taken up abricklaying course but was still signingon every two weeks. One week he was

13 Jobcentre Plus figures, August 2008.

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told he must sign on to New Deal andhe explained his course to the New Dealadviser. His adviser was really helpful,but when literacy and numeracy testsfound he needed further support he wastold he’d have to do another test and goon ND Gateway, which would meancoming off his Bricklaying course. TheNew Deal programme was due to startthe same day as his exam – which afteralmost a year on the course he didn’twant to miss, but he was told that he’dlose his benefits if he went to the examinstead of the New Deal programme.He felt that Jobcentre Plus was provinga barrier to his return to quality work.“It’s as though you’re just processed asa number. You do what they saywhether it actually works to get you inwork or not.” The ironic thing was thatusing their initiative they managed towork round it, by him signing off and hiswife signing on just so he could do theexam with no break in their claim. Herperception was that “.... they want youto accept minimum rates at dead endjobs and they don’t help you to betteryourself.” She was slightly worried aboutbeing called up for a New Deal interviewherself as she was also studying for anNVQ level 2 in childcare which shewanted to raise to level 3.

Another CAB reported that a client on abusiness administration course was toldthat she would face sanction if she didnot accept a volunteering placement aspart of New Deal. It clashed with hercourse but they could not take accountof her hours in college or that she hadexams coming up.

In January and February 2008 the PublicAccounts Committee published two reports:Helping people from workless households intowork and Sustainable employment: supportingpeople to stay in work and advance, which

emphasised the importance of training andskills.14 Some lone parents told us about thedifficulties getting help from their lone parentadviser to do training courses and developtheir skills in order to widen their jobopportunities.

A Vietnamese lone parent with limitedEnglish had put herself on an Englishcourse. Her personal adviser offered helpto go on a cleaning course but when sheexplained that she was studying Englishand it would clash, she was just told togo away and come back when she wasready.

“I’ve just finished a GCSE and got a B. Irang to ask my personal adviser if I coulddo another course and what benefits Iwould get, but she never got back tome. I went down to the college to lookfor courses. I would love to have a careerbut I don’t know what I’m good at. Idon’t know what there is apart from thesupermarket, so I thought college mighthelp me better my qualifications. Theyasked me to see a career adviser but itdidn’t happen and now the new coursesare starting”. Lone parent with threechildren aged 4-15 years.

Citizens Advice therefore welcomes theproposed ’closer integration of employmentand skills provision’ and ‘faster access to theright training’15, but we believe thattraining courses should not automaticallybe seen as secondary to taking up a lowpaid job. We strongly recommend thatmore weight is placed on people’spersonal efforts to pursue training, andthat advisers should have the authorityto use their discretion in applying benefitsanctions.

Under the new regime, under which loneparents are required to seek work when theiryoungest child is seven, the initial JSA

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14 Helping people from workless households into work, HC301, January 2008, and Sustainable Employment: supporting people stay in work and advance, HC131,February 2008

15 In work: better off, executive summary, para. 45, DWP, July 2007

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interview is the opportunity to identify anindividual’s barriers to work, and determinethe appropriate job-search activity to berecorded in the Jobseekers Agreement. Thisinterview is scheduled for only half an hour,which may not always be long enough toaddress the barriers in detail, and there is anaspiration – but no guarantee – that it will beconducted by a specialist lone parent adviser.We recommend that all JSA agreementsfor lone parents are completed byspecialist lone parent advisers, andinterviews are extended to 45 minutes orone hour.

The JSA regime is based on the expectationthat 40 per cent of claimants will find workfor themselves within the first three months. Itthen increases both support and sanctions asthe client spends more time on the benefit,including a skills assessment after threemonths16. We recommend that the optionfor a skills assessment should be offered atthe initial work-focused interview.

Citizens Advice evidence shows people can bepushed into jobs with low wages and poorprospects to increase their earnings when theymight be better off training for skills which inthe longer term would bring higher incomes.We recommend that all claimants relianton an income top up from the In-work-better-off credit are given full skillsassessments and the opportunity to takecourses to improve their skills. This wouldattempt to boost their earning power,increasing their opportunity to earn morethan the minimum wage and over timereduce dependence on subsidies.

For vulnerable claimants, finding work is onlythe beginning. They will often need furtherhelp through the transition from benefits towork, including specific help with financialchanges, readjusting payments andbudgeting. As noted in the Interact report ofDecember 2007, the loss of passportedbenefits, though significant, may not be

recognised until after the move intoemployment17. This may then cause difficultiesfor staying in work and out of debt. For somelone parents, juggling a variable income aswell as new demands, such as childcare andtransport, can mean that they fail to managewithout significant support in work.

Last year I found a full-time job but itwas difficult because I had no car. Itfailed because the first month they cutall my income. I had no income supportbut still all my bills, rent, school meals,everything but no salary until the end ofthe month. It was also quite difficult toget to pick up the children in time. Theschool club had refused to have themall, then my brother helped but he hadproblems getting to work, then oneneighbour would take them and pickthem up for me. The school club wasvery expensive, no deductions for afamily and they would have had to bedispatched to different clubs in theholidays. Lone parent, recentlydivorced with five children aged4-10 years.

Lone parents may not be aware of the newsupport available to them – such as the26-week In-Work Advisory Support provision,or In-Work Emergency Discretion Fund. Wewelcome these provisions, but recommendthat the support of a personal advisershould be available for one year afterclients move into work.

Helping clients assess their full benefitentitlement and income maximisation iscentral to CAB advice work. Every monthadvisers help with around 12,500 queriesabout eligibility to income support, tax creditsand associated passported benefits. Thecomplexities of the benefit and tax creditsystem – and in particular how housingbenefit and tax credits interact – mean thatindividuals are unable to predict easilywhether increasing their hours of work will

16 Ibid, chapter 217 Interact: benefits, tax credits and moving into work, Community Links, Low Income Tax Reform Group, Child Poverty Action Group, December 2007, page 19

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bring in an overall increase in income.Working extra shifts or doing overtime bringin additional costs of childcare, travel andschool meals, as well as complicating thereporting process for benefits. These factorstogether can mean that working in low paidjobs can leave people no better off.

Given the complexity of people’s finances, it isessential that they receive good qualityinformation and advice. The CAB clientresearch highlighted the importance of givingclients good, clear advice on their financialposition in work, as compared with theposition of being out of work and on benefits.Inadequate information and advice aboutbenefit entitlement from Jobcentre Plus canhave a significant impact on a claimant’sability to manage the change. CAB advisersoften report a complete lack of recognition byJobcentre Plus of the range of other benefitsthat claimants get, such as free school meals.

Providing lone parents with comprehensiveand understandable better-off calculations iscrucial in enabling them to consider returningto work.

One CAB had to translate anincomprehensible better-off calculationprovided by Jobcentre Plus when theclient had visited them to seek advice onreturning to work. The calculationincluded the following statement: “AWTC estimate based on CY income isnot appropriate where CY income ismore than PY but less than £25,000.Please refer to the PY WTC report for anestimate of WTC.” Not surprisingly, hedid not understand what it meant and asthe Jobcentre Plus adviser did not explainit to him, he felt it was difficult to makean informed decision about returning towork.

We recommend that Jobcentre Pluspersonal advisers must be trained toprovide accurate better-off calculationsand comprehensive advice, including:

� an assessment of the loss of passportedbenefits;

� extra travel costs;

� childcare costs not met by working taxcredits or housing benefit; and

� the drop in tax credit income in thesecond year of return to work

Advisers should also be able to identifyand assist with claims for housing andcouncil tax benefit and any other localassistance such as school uniform grants.

As the income of low income households isincreasingly made up of a mixture of benefitsand tax credits, administered by a number ofGovernment departments, it is vitallyimportant that wherever the customer makescontact they are able to get advice andsupport to claim the full range of their benefitentitlements. We therefore recommendthat tax credit office staff are also able toadvise claimants on eligibility for housingand council tax benefit. In the longer termthe aim should be the creation of a singleclaims process.

4. Being financially worse off in workthan on benefits

The interviews, questionnaires and theevidence from bureaux all highlighted theimportance to lone parents of actually beingbetter off in work than on benefits, takingaccount of all the additional expenditure andeffort associated with working. Worryingabout having to pay for housing was the mostcommon concern expressed. One woman toldus about her experience of when she was alone parent:

“When I had my first child, I was singleand not working, on benefits and it wasquite difficult. I wanted to go back towork but when I went to the Jobcentre Ifound out that I’d only be £10 betteroff. I could therefore see no real benefitfrom working for a whole week. It’s noincentive to encourage women back into

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work. Now I’m off benefits I could get ajob and I wouldn’t lose financially. Therewas no incentive before. I have foundSure Start. I’m doing back to workcourses here such as the childmindingcourse, NVQ2, domestic violence, firstaid and a cooking course which will helpme. I’ve thought about working and canconsider it now.”

The information seen as most helpful by thehighest number of respondents to the SureStart and Horizons questionnaires, wasknowing how much better off they would befrom wages and benefits.

“The Jobcentre Plus personal adviser saidshe could see I wasn’t ready to go backto work yet. She worked out if I workedat Asda I would be £50-£60 a weekbetter off, but then I have to find thebus fares and the childminder and thefares to and from the minder. Whenyou’ve got children, you need to knowwhat’s coming in. Security of knowing

what is coming in every week.”Interviewee with children aged 4-15years.

Better-off calculations

According to DWP research, 87 per cent ofJobcentre Plus better-off calculations find thatthe lone parent will be better off in work,allowing for income supplements such as taxcredits18. The introduction of the in-workcredit in April 2008 is likely to have increasedthis percentage as it will increase back-to-work income for the first year of work.

Figures 1 and 2 below show the impact ofdifferent working hours on the weekly incomeof a lone parent with two children, based onNI and tax rates at April 2008. S/he is earning£6 an hour, and paying rent of £85 per week,and council tax of £20 a week. Her childcarecosts rise as her working hours rise.

Figure 1, below, shows how someone movingoff income support into 16 hours of work can

Hours worked perweek

Net weeklyincome fromwork after tax

Total incomefrom work andincluding taxcredits; childbenefit;

housing andcouncil taxbenefit; andin-work credit

Net disposableincome afterpaying rent,council tax andchildcare costs

Net gain in overallincome

3 plus incomesupport

£18.00 £305.43 £200.43 —

16 £96.00 £426.41 £271.41 £70.98

20 £115.20 £453.54 £273.54 £2.13

25 £135.90 £480.89 £275.89 £2.35

30 £156.60 £512.84 £282.84 £6.95

35 £177.30 £543.32 £288.32 £5.48

Figure 1: Change in income moving off income support and into work.

18 Integrated finding from the evaluation of the first 18 months of lone parent work-focused interviews, Thomas A and Griffiths R, page 38, referred to by Yeo Ain Experience of work and job retention among lone parents: evidence review, DWP Working Paper 37, 2007.

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initially boost their household income byaround £70 per week. This is because mostlone parents now benefit from the new £40in-work credit from the DWP. However, thefinancial gains from increasing hours of workare very low. Although working 20 hoursinstead of 16 will show a net gain of £19 onher payslip, the consequent reduction ofmeans-tested benefits and tax credits willresult in her only gaining £2.13 overall, or53p for each of these extra hours worked.The gains for increasing hours to 30 are betterbecause working tax credit pays an extraannual element of £735 to those people whowork 30 hours or more per week.

Once a household’s income rises above thethresholds at which a maximum entitlement

to a benefit or tax credit applies, benefits arereduced. Housing benefit and council taxbenefit are reduced at the rates of 65p and20p respectively, for every extra pound ofincome. This explains the very smallincremental gains from increasing workinghours.

At 35 hours, the worker has such a highincome from tax credits that s/he is no longereligible for housing benefit.

Figure 2 shows:

� Income in the second year of return towork is lower than the first year in allcases. This is because, firstly, the £40in-work credit (which is disregarded when

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£0

£100

£200

£300

£400

£500

£600

Council tax benefitHousing benefitChild & working tax credits

In-work creditChild benefitWeekly income from work after tax

Yr2 35

Yr1 35

Yr2 30

Yr1 30

Yr2 25

Yr1 25

Yr2 20

Yr1 20

Wee

kly

£

Hours

Figure 2: Changes in income sources as hours and wages rise. (Expenditure onchildcare, council tax or rent is excluded).

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calculating entitlement to other means-tested benefits and tax credits) ends afterthe first year. Secondly, tax creditcalculations are based on the previousyear’s income and allow an increase in thecurrent year of up to £25,000 to bedisregarded. For someone returning towork, the previous year’s earnings will benil, so unless they earn more than £25,000in their first year in work, their tax creditaward will be based on the nil incomefrom the previous year. In subsequentyears, the tax credit award will be basedon the earned income and as a result islikely to be lower.

� A lone parent in low-paid work isdependent on income from a total of sixsources and the amounts from the means-tested elements change as hours of workand income from wages change. Once alone parent is working 30 hours, the extraincome from wages and tax credits almosteliminates any eligibility for housingbenefit. However, income from housingbenefit and council tax benefit then go upagain when tax credit income falls in thesecond year of work, although this doesnot fully compensate for the reduction intax credits.

In the case below, a 30 per cent increase inthe number of hours worked per week onlyachieves just over one hour’s worth of extraincome:

A lone parent of three school agechildren was working 42 hours a weekat £6.05 per hour, as a dental nurse. Shewanted to spend more time with herchildren and had been offered theopportunity to work fewer hours. Theadviser helped calculate her incomebased on cutting her hours to either25.5 hours or 34 hours. Working 34hours, would only give her about £6.50more than if she worked 25.5 hours,which would mean working 8.5 hours

for £6.50. So she had very little incentiveto work more.

The budget report of 2008 noted that thenumber of people making such small financialgains for working extra hours (technicallyknown as marginal deduction rates) hasreduced in the last ten years – with almost75 per cent reduction in those losing morethan 70 per cent of extra income earned. Thenumber of people facing marginal deductionrates of over 60 per cent, however, has soaredto almost 1.9 million.19

The poverty trap facing low income homeowners is even more acute as there is no in-work help with housing costs, and help withmortgage interest through income support(ISMI) is only available after a 39 week wait –too late for those with no savings or insuranceprovision20.

A lone parent from Gloucestershire wasworking part time. She had threechildren, one of whom was disabled.Having recently separated from herhusband, she needed to start paying themortgage. However she could get nohelp with the cost of the mortgage whileshe was working and felt she had nochoice but to give up her job and claimincome support. The alternative was toleave the family home and rentelsewhere, but as their home had beenspecially adapted to meet the needs ofher son’s disability she didn’t want to dothat.

Home owners also lose out on help withchildcare costs. While tenants can get helpwith a maximum of 97 per cent of childcarecosts through a combination of paymentswithin tax credits and disregards in housingand council tax benefit, home owners canonly get help with 84 per cent of childcarecosts through tax credits and the disregard incouncil tax benefit only.

19 Tax credits: improving delivery and choice – a discussion paper, HM Treasury and HM Revenue and Customs, May 200820 Set up to fail: CAB clients’ experience of mortgage and secured loan arrears problems, December 2007

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Recent DWP research evaluated three back-to-work initiatives and found that the financialincentive provided by working families’ taxcredit was more helpful overall than otherforms of support21. From April 2008, theGovernment rolled out a new in-work credit,which pays £40 per week (£60 in London) toqualifying parents for up to 52 weeks. Inrecognition of the financial instability ofreturning to work, the 2008 Green Paperstates the DWP’s intention to pilot anadditional ‘in-work-better-off’ credit, whichwould top up income to ensure that familieswere at least £25 better off than they wouldbe on benefits, but only lasting for six months.

While these short-term credits contribute tothe immediate needs of parents already closeto the labour market, they also increase thecomplexity of a family’s income in the firstyear, and do not necessarily produce asustained increase in income compared withtax credits and their predecessors. Theevaluation of the in-work credit pilots foundthem to be most successful in improving thesituation for those who would have returnedto work anyway, rather than helping loneparents who faced serious financial barriers towork22. Even if they receive good advicewhich explains that these credits will end, andstill decide to work, lone parents returning towork on low incomes have to adjust to thedrop in income after six months or a year,when both credits come to an end, and taxcredit income also drops.

In contrast, the Government’s plan todisregard child benefit in calculations forhousing and council tax benefit for workinghouseholds from October 2009 provides moreeffective help in the long term. By allowingfamilies to keep more of their income onreturning to work, this measure significantlyboosts work incentives – at least for those inrented accommodation. The lone parent withthe circumstances described in the table abovewill see gains of around £20 from working

more than 20 hours. However, the take-uprate of housing benefit and council tax benefitamong working households is 50 per cent atbest. We therefore recommend aconcerted drive to improve take-up ofhousing benefit amongst eligible workingfamilies.

We welcome the Government’s internalreview of the housing benefit system23

but would like to see a broader review ofways in which all low income households,regardless of housing tenure, can besupported to meet their housing costs.

We recommend that the Government setup a Welfare and Poverty Commissionwhose remit should include:

� Removing help with childcare costsfrom housing benefit and examiningways of supporting childcare throughone system. This could be by increasingthe support within the childcareelement of tax credits.

� Creating one mechanism to help lowincome tenants and home owners alikewith their housing costs. This could bedone by adding a housing element intoworking tax credits, which would helpmove many lower income workersfrom dependence on housing benefitand associated high marginaldeduction rates – which would helpmake work pay.

Additional costs of working

All the above calculations are limited tochanges in benefits and tax credits, and donot include the loss of passported benefitssuch as free prescriptions and free schoolmeals. They also do not include the extratravel costs of going to work, costs of lunchesand work clothes and potential childcare costsassociated with working – all of which cancompletely wipe out any small gains.

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21 The New Deal for Lone Parents, lone parent work-focused interviews, Cebulla, A; Flore, G; Greenberg, D, and Working Families’ Tax Credit: a review of impacts,DWP research report 484, 2008

22 The lone parent pilots after 12 to 24 months: an impact assessment of In-Work Credit, Brewer, M et al, DWP research report 415, March 2007, Work searchpremium, extended schools childcare, quarterly work-focused interviews and New Deal Plus for lone parents

23 Budget report 2008, Chapter 4, HM Treasury

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A full calculation of whether or not someonewill really be better off depends on a numberof individual circumstances and it is importantthat the full range of factors are accuratelytaken into account and explained toclaimants. Lone parents often find, however,that the information they receive does nottake full account of all the additional coststhey might face.

A London CAB running a specialist debtand benefits advice project was helpinga single parent with two children whohad taken the step of moving back intothe labour market, working as a selfemployed cleaner for 16 hours a week.Despite her weekly wage, her in-workcredit of £40 per week, child benefit, taxcredits and housing/council tax benefit,she found that going back to work hadnot been financially beneficial. She hadgot into rent arrears of over £500 andwas worried that her family would beevicted. In the end she decided to resignfrom her job and return to claimingincome support and full housing/counciltax benefit, out of which she would haveto repay her rent arrears.

For many families, the relatively small financialbenefits of moving into low paid work can bealmost entirely used up by suddenly having topay for their child’s school meals – an averagecost of £9 per child per week24 – particularlywhen the first payments have to be madebefore their first pay cheque has beenreceived.

On top of that, other school costs will alsoincrease, as there will no longer be helpavailable for school trips (residential tripsaverage from £120 at primary level to nearly£200 at secondary school25) and where localauthorities provide uniform grants, these areonly available to households on out-of-workbenefits.

A wide range of other financial costs will beincurred by a family when moving fromreliance on benefits to reliance on a mixture ofearnings, tax credits and benefits. Theseinclude higher transport costs, loss oftransport concessions, loss of leisureconcessions and having to pay forprescriptions. Furthermore, the lone parentwill no longer have access to interest-freecredit through the social fund budgeting loan.

A CAB in East London advised a loneparent who was struggling to afford allthe costs of sending her children toschool. She had recently come offincome support as her working hoursincreased to 20 per week. As a result shewas no longer entitled to free schoolmeals for her two children. She also lostentitlement to help with school trips.She had just been asked for £200 forher oldest daughter’s school trip toFrance and didn’t know how she wouldbe able to pay it without getting intoserious financial difficulty.

Any increase in income is not only weighedagainst increased expenditure, but also thestress of juggling work and family life, and theloss of quality time available to spend with thechildren.

“Who is going to look after my childrenwhen I’m at work? You cannot take timeoff every time it’s needed at school. Ifyou use a childminder, you’ve still got toget them to the childminder on publictransport which costs an arm and a leg(£1 each way on the bus and 70p forchild, which is £3.40 return – that is over£10 a week). I don’t want to get intoany financial trouble and fall behind withmy bills. I worry about being in debt andI don’t like not being able to pay myway. You might only be £10 a weekbetter off and you’ve got to organise achildminder and get the child to theminder. It’s no incentive. It’s not worth it

24 The cost of schooling, DFES, 200425 Ibid

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and not worth the hassle of organisingit. At the moment I feel the childrenneed me.” A woman with childrenaged 15, 10 and four years and livingon income support since the break-up up with her husband four yearsago.

Another woman interviewed was probably themost determined to work, despite having fiveyoung children. When the constant juggle tocope with children and her full time jobbecame too much, she continued to work ona voluntary basis and was articulate atdescribing the trade-offs between work andbenefits.

“I’d like to go on holiday but it isdifficult on income support, so I wantto work. I have just enough to live on.When you work you have otherproblems, everything to pay for, andnothing left over and no help withthings like school meals. On incomesupport you have help but you don’thave enough money. You earn morewhen in work but you don’t see quiteenough to save some money foractivities. What would make the mostdifference for me would be to be ableto use the school club after school andin the holidays and have the schoollunches paid for.”

We recommend extending entitlement tofree school meals to families in receipt ofmaximum working tax credit. While localauthorities in Wales and in some parts ofEngland provide uniform grants to low incomefamilies on out-of-work benefits, werecommend that all authorities shouldprovide uniform grants and extendentitlement to all households in receipt ofmaximum working tax credit. This wouldprovide more sustainable support for familiesin low paid work than temporary measuressuch as the in-work credit.

We welcome the introduction of the in-workemergency discretionary fund but we do notthink that this replaces the need for loneparents to be able to access social fundbudgeting loans. We therefore recommendthat entitlement to budgeting loans isextended to households in receipt ofmaximum working tax credit.

Working a few hours

The benefit system does not currentlyencourage lone parents to begin to work parttime. They can only work three or four hourswithout losing any benefits, or they need towork at least 16 hours in order to be able toget financial support from the tax creditsystem.

Yet working a few hours or a day a week, inso called ‘mini-jobs’, can be a good way forparents to maintain contact with the labourmarket while caring for their children,particularly when they are very young.

The working hours of lone parents andmothers in couples are very different, eventhough their caring responsibilities may besimilar. Mothers in couples – who generallyhave more choice about working hours – aremuch more likely to work eight hours. Loneparents are most likely to work four or 16hours, four hours at minimum wage being theearnings limit for income support claimaintsand 16 hours, the minimum hours limit forworking tax credit. This suggests that theworking pattern of lone parents is beingdetermined by the benefits system rather thanby any strategic design to move into work inthe longer term26.

The Joseph Rowntree Foundation researchfound that increasing income disregards forincome support, housing and council taxbenefit would provide the best incentives forlone parents to work in ‘mini-jobs’. Theresearch calculated that this could increase thelone parent employment rate by over five percent.

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26 Lone parents and ‘mini-jobs’, Bell, K, Brewer, M and Phillips, D, JRF, October 2007

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Under special ‘permitted work’ rules,incapacity benefit and new employment andsupport allowance claimants are allowed toundertake work for up to 16 hours a week forup to 52 weeks, with a weekly earnings limitof £88.80, without affecting their benefit.Lone parents face many of the same barriersto work as incapacity benefit claimants.Changes could be made to the benefit andtax credit rules to enable lone parents to workpart time, thus keeping in close contact withthe labour market before their circumstancesenable them to work16 hours.

We recommend that the Governmentextend permitted work rules to loneparents to enable them to keep in touchwith the labour market, by increasing theearnings disregarded, allowing people tokeep all their earnings up to sixteen hoursat the minimum wage otherwise, werecommend that the hours at which theybecome eligible for tax credits be reducedto eight.

A similar proposal is being promoted by theCREATE Consortium, which is campaigning toestablish a new Community Allowance. Thiswould allow people to be paid for smallamounts of time spent on activities thatsupport their local communities, withoutautomatically losing their benefits. There areseveral advantages, in terms of socialinclusion, work practice, community cohesionas well as the physical improvement to thelocal environment. The Green Paper, however,proposes that doing community work maybecome a condition for people to continuereceiving benefits.

5. Inflexibility of the benefit system andmoney problems

The benefit system itself can act as asignificant barrier to work for many loneparents. Many fear that change will put thefamily finances at risk. Families on lowincomes do not have the savings to coverthem through gaps in income as they wait forbenefit claims to be processed or wages to be

paid, and can very quickly find themselves indebt. Other families already struggling tomanage their debts fear that a change in theirincome will spoil their existing repaymentarrangements. Bad experiences of debt whenthe benefit and tax credit systems fail torespond quickly to a change in workcircumstances can damage their willingness torisk moving into work – or better paid work –in the future.

Three quarters of questionnaire respondentscited money and debt problems and potentialbenefits problems as key concerns whenthinking about work. The following caseillustrates the problems claimants can face ifthey are not given accurate advice andsupport to negotiate the benefit system:

A lone parent had been advised by thelone parent adviser that if she took a jobfor 22 hours at minimum wage shewould get tax credits and still get somehousing and council tax benefits. Sheshould have been entitled to a fourweek housing benefit run-on but it wasturned down in error and sheexperienced continuing problems withher claim. A summons for council taxarrears costing £45 had been issued justtwo weeks after the end of the run-onperiod (which would not have arisen ifher claim had been properly processed).She faced considerable hassle chasing upher employer, getting payslips and tryingto get the council to speed up herhousing and council tax benefit claim.She would have had to pay the costs ofthe summons if the CAB could not get itwaived. She does not feel the step intowork has been worth it.

CAB evidence points to three main issues thatneed addressing if the complexity barrier is tobe removed:

� Income gaps when wages or benefits stopbefore the other starts, when moving frombenefits to work or vice versa.

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� Complexity and failure of the benefits andtax credits systems to respond quickly to achange of circumstances resulting inoverpayments of tax credit, housingbenefit and/or rent arrears.

� Managing debt repayments.

Income gaps between wages and benefits

The transition to work from benefits can putfamilies into debt as extra work-relatedexpenses such as travel, childcare and schoolmeals start immediately, but benefits stop andwages are usually paid in arrears.

“I found a full-time job .. but … it failedbecause the first month they cut all myincome. I had no income support but Ihad all my bills, rent, school meals, butno salary until the end of the month.”Interviewee

Errors and delays in the processing of benefitscause significant problems for CAB clients27.Short term work is a common and valuableexperience for people with poor basic skills,and/or recurring illness. It can give valuableexperience and income. Jobcentre Plus hasworked hard to improve services and is nowlargely achieving its processing targets28, butCAB evidence still shows problems for clientswhen benefits are not processed quicklyenough, to the point that as people move inand out of work, some refuse work that maycause a prolonged break in their income.

“It’s very difficult to get income supportand Jobseekers Allowance. I had to waita long time when I lost my job andmade a claim. It took a few months andthey asked all sorts of questions. It tooktoo long and when you want to contactthem, they put you on hold. I incurreddebt with my friends during this periodand I’m still in debt and trying to repay itslowly. I can’t even afford to pay the TVlicence fee so I sold the TV, rather thangetting a fine.” Vietnamese loneparent.

Three of the four Vietnamese and Cantoneseclients were dealing with debts incurred whentheir husbands had lost their jobs, followed bya few months’ delay in benefit payments.

Help may also be needed to access affordablecredit, as low income working households loseentitlement to social fund budgeting loans.The story of one Horizons client highlights thefinancial risks of starting work and the needfor support in financial management duringthe transition.

“She has faced two financial mini-crisessince coming off income support. First,since her council tax arrears were nolonger being paid through deductionsfrom benefit, she faced bailiffs’ actionfor the amount owing. As an alternative,the adviser helped her to arrange withthe council to make deductions from herwages. Though not ideal, this waspreferable to incurring bailiffs’ charges.Secondly, her fridge broke downirreparably just before Christmas. Notbeing on income support, she had norecourse to a social fund budgeting loan,but was fearful of going into furtherdebt via a catalogue or store purchase.Fortunately, we were able to secure hera re-conditioned fridge from a recyclingcharity.” Horizons worker.

Important steps have been made to reducethe incidence of debts arising from thetransition to work:

� We welcome the four week ‘run-on’ ofworking tax credit which was introduced in2007, which means that it can be paid forup to four weeks after a claimant stopswork, to allow for delays in reporting andacting on the change in circumstances.However administration of this payment iscurrently causing problems for gettingincome support put into payment.

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27 Not getting through: CAB evidence on the new system for claiming benefits from Jobcentre Plus, July 200728 JCP clearance for changes of circumstances for JSA claimants take on average 3.4 days against a target of 4 days, DWP figures, June 2008

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� We also welcome the proposed roll-out ofthe In-Work Emergency Discretion Fund,which will be available for sudden financialneeds which might otherwise threaten thelone parent’s ability to stay in work. Weconsider however that it would have beenbetter to extend entitlement to budgetingloans.

� We welcome ‘In and out-of-work’ pilots,which involve Jobcentre Plus sharinginformation across Governmentdepartments – specifically the HMRC taxcredits service and local authorities (whoadminister housing and council taxbenefit). This streamlines services forpeople moving in and out of work, andtherefore encourages them to take work,even when they know it will only betemporary.29

These pilots cover six areas of the country andonly apply to Jobseekers Allowance claimants,and have been shown to increase speed ofbenefit payments by 15 per cent30. Werecommend that these pilots should beextended to income support andemployment support allowance, androlled out nationally as soon as possible.

Complexity of the benefit and tax creditsystems

Tax credits form a vital component of theGovernment’s strategy for tackling childpoverty and making work pay. 1.7 millionfamilies now rely on working tax credit tosupplement their working income and fundtheir childcare costs31. CAB evidence suggests,however, that the complexity of the tax creditsystem – together with the furthercomplications people face when they rely on acombination of earnings, tax credits andmeans-tested benefits – create many problemsfor claimants, who find it difficult tounderstand their entitlement, and to keep upwith changes.

Advisers report seeing clients who havechosen to give up part-time work in order toimprove their financial stability because thepresent system is too complex and unreliable.

One adviser reported a woman whogave up her part time (16 hours) workwhen her partner was made redundantpartly because of the complexity andconfusion of their financial position.Housing benefit kept telling themdifferent things about their assessmentand they ended up in debt and onlymanaged with financial help from hermother.

Another adviser described how one ofhis clients regularly faced bailiff actionfor council tax arrears and possessionaction for rent arrears because thesystems could not keep up with eachother. Eventually she gave up paid workwith the plan of only returning when shecould find full time work.

Low income households in rentedaccommodation may be claiming tax credits –run by HMRC, and also be dependent on helpwith housing costs and council tax throughhousing and council tax benefit, which areadministered by local authorities. Both taxcredit and housing benefit calculations takeaccount of very similar information, includingearnings, savings and childcare costs, but eachsystem has different reporting requirements.The housing benefit system requires weeklyreporting of changes. Tax credits arecalculated annually and only require certainspecified changes to be reported. Forexample, in relation to childcare, changesmust be reported if they affect the annualaverage costs. So if a lone parent experiencesa rise or fall in childcare costs in a week dueto holidays or their child being sick, they maynot have to report it to HMRC, but they willhave to report it to the local authority as it

29 DWP, HMRC and North Tyneside District Council have been testing possible service improvements, The Freud Report, DWP, 200730 Jobcentre Plus presentation at DWP annual forum, July 200831 Child and working tax credit statistics April 2008, National Statistics 2008

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may affect the amount of housing or counciltax benefit they receive.

It can be extremely complex and timeconsuming for claimants to keep two systemsupdated with changes in income or childcarecosts, which helps to explain why somehouseholds entitled to only a small amount inhousing and council tax benefit often fail toclaim, because it is not worth theadministrative complexity for the relativelysmall gains. However, DWP research hashighlighted that underclaiming of housing andcouncil tax benefit was significant in relationto child poverty32.

Even if a person reports accurately, thiscomplex administrative burden inevitably hasan impact on the quality and efficiency ofGovernment departments in responding tochanges in individual circumstances. Failure bylocal authorities to keep up to date withreported changes can cause serious difficultiesfor families, as overpayments accumulateand/or rent and council tax arrears build up.

A single parent with two teenagechildren got into difficulty with herhousing benefit when her work hourschanged from around 31 to 16 hours aweek. Her 19 year-old son also got a jobfor a couple of weeks. She informed thelocal authority of both changes, but ittook several months to reassess herbenefit. Things were further complicatedby the fact that she had to continuallyreport changes in her wages as she wastrying to do overtime when it wasavailable. She was careful always toreport the changes, but processingdelays resulted in constant over andunderpayments which caused herbudgeting problems and led to rent andcouncil tax arrears. She was now beingthreatened with possession action, wasvery concerned that she might lose herhome and was seeking help from herdoctor for stress.

Recent CAB research33 of housing associationtenants facing court action for rent arrearssuggested that tenants in work were morelikely to incur rent arrears than those whowere out of the labour market. Nearly half(43 per cent) of the clients in court for rentarrears were working, whereas amongsthousing association tenants as a whole, only34 per cent are in work.34 This is consistentwith DCLG research which found that:

“Increases in the level of serious rentarrears in recent years were in part dueto rising levels of tenant employmentwhich, due to its frequently low paidand erratic nature, paradoxicallyincreased tenants’ vulnerability to seriousrent arrears”.35

It is extremely common for CAB clients toexperience significant financial problems whenthey move from benefits into work as a resultof complex and inadequate systems tosubsidise their low pay. One intervieweetold us:

“Recently we’ve had lots of confusionand problems which all stem fromworking tax credit from when he wasworking. They gave him some moneythey owed him from when he wasworking, when we were on incomesupport, who then took it intoconsideration ….when we had thistrouble, the council said we owed them£250 rent for this period or we weregoing to be evicted.” Interviewee.

A Horizons worker helped a lone parent whowas working and receiving working and childtax credit.

“Her circumstances had changed overthe year but on each occasion sheinformed tax credits and the local councilas she understood that the changeswould affect her housing and council tax

Barriers to work

32 Delivering on Child Poverty: what would it take? A report for the DWP, November 2006, Harker, L, DWP 33 Unfinished business – housing associations’ compliance with the rent arrears protocol and use of Ground 8, Citizens Advice, 200834 Survey of English Housing, DCLG, 2005/0635 The use of possession actions and eviction by social landlords, Pawson et al, DCLG, 2005

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benefit entitlement. The local counciltook nearly six months to finalise herclaim, which resulted in her almost beingevicted for rent arrears. Having beenpaying the benefit since January 2007,they wrote to the client in June to saythey had overpaid her. The client isexhausted and very frustrated. We arenow helping the client make an appeal.”Horizons Worker.

Tax credits are key in the Government’sstrategy to make work pay. Failure to receivetax credits will have a direct impact on thefinancial viability of returning to work.

“Ideally I want full time work and to beoff benefits and I don’t want workingtax credit because if within the first 12months they say ‘We’re sorry we’veoverpaid you. You owe us £3,000’, Iwon’t be able to pay that back. Theydon’t realise there’s one wage earnerand several children or dependentsrelying on that one wage and if I lose mymoney, I could lose my house.” A loneparent with two teenage children.

“It … (a mix up with HMRC filling in thetax credit form) took six months to getsorted. That put me off applying for helpwith childcare, or help with anything.”Interviewee.

Although the system for recovering tax creditsoverpayments has been improved since itsintroduction in 2003, Citizens Advice Bureauxcontinue to see a steady stream of clientswhose bad experiences of overpaymentrecovery make them reluctant to continuewith their claims. Almost half of therespondents of a 2007 tax credit survey saidthat despite the credits being an importantpart of their income, their experiences madethem less likely to claim again36.

A similar concern was expressed by theParliamentary Ombudsman in the secondcritical report of tax credit administration. Theintroduction of tax credits saw a dramaticincrease in the number of complaints handledby the Parliamentary Ombudsman and therate at which she upheld tax credit complaintswas also much higher than for othercomplaints. Seventy eight per cent ofcomplaints were partially or wholly upheld in2004/05 and 90 per cent in 2005/06 37.

The proposed Welfare and PovertyCommission should examine theinteractions of the benefits, tax, and taxcredit systems with a view tosimplification. Its remit would include:

� Removing help with childcare costsfrom housing and council tax benefitand introducing a housing element inworking tax credit, as recommendedearlier. Both these steps would not onlyimprove work incentives but reducethe administrative burden on familiesand administrators resulting fromduplication of reporting.

Managing existing debts

Existing debt problems can create apsychological barrier to work for some loneparents, since it can be impossible to considerany further changes in circumstances whenoverwhelmed by financial crisis. Evidence fromthe Horizons projects shows that gettingexisting debt problems under control canchange a client’s attitude, often empoweringthem to consider starting or returning towork. Project workers see significant changesin clients’ outlooks after they set up affordabledebt repayment plans. Learning to understandfinances and prepare a budget is a further keystep in preparing for work. The following caseillustrates the range of support with debt thata lone parent may need at the point oftransition from benefits into work.

36 Tax Credits: the current picture, Citizens Advice, September 200737 Tax Credits: getting it wrong, HC 1010, October 2007

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A 25 year-old lone parent supported bythe Wolverhampton Horizons projecthad two children aged three and11 months; she had just gone througha divorce and had a range of debts. Herpressing concern was her rent arrears;she had received a letter from herlandlord advising that he wasconsidering eviction proceedings. Shewas given an appointment to see ahousing specialist and her housing issuewas resolved without the need for legalaction.

She was also referred to a debtcaseworker who helped her arrangenominal £1 offers to the creditors of hernon-priority debts. She was helped to setup a budget sheet and make paymentplans for keeping on top of her futurebills.

She later returned as she wasconsidering part time work and wantedto know what benefit help she would beentitled to. The adviser completed a‘what if’ calculation but it showed thatthe client would not be any better off,as she only wanted to work eight hoursa week and therefore would not beentitled to working tax credit. With thisinformation she went away to considerwhether she could look for a jobworking 16 hours a week.

In another case, a lone parent visiting aNorth Liverpool CAB was helped initiallyto apply for a community care grant tohelp her set up home after fleeingdomestic violence and went on to takepart in a financial capability course. Shetold the trainer that the session had“given her the skills and confidence todeal with financial things that she had,up until this point, avoided”. She thendiscussed work options and her ambitionto become a hairdresser. The project wasable to help her find an appropriatecourse and remained in touch with her

to support her through her training,helping her with grants for equipment.

When someone does move into work,repayment arrangements for existing debtwil often need changing as creditors demandhigher payments. Boosting an individual’sfinancial capability can increase theirconfidence to consider changing theircircumstances, and might include leavinglow paid work to take up training.

Eighteen months after seeking help withdebt problems, one lone parent with arange of issues was still being supportedby her bureau. She had £5,000 ofnon-priority debts and was helped tocomplete a financial statement to sendwith offer letters to creditors. She wasworking part-time but very unhappywith her job. She had left school withoutqualifications and was interested ingetting back into education. The bureauadviser helped her explore the optionsavailable to her and carried outcalculations to assess her benefitentitlement if she did not work. Shereturned a few months later having hadoffers of repayment accepted by most ofher creditors. She needed help updatingher financial statement as she had givenup her job and was claiming benefitsbecause she was enrolling on a collegecourse in September.

The Government clearly recognises debt as abarrier to work – New Deal programmes, forexample, have included voluntary referral todebt advice. The 2008 Green Paper, however,suggests a requirement to seek debt advicemight be included where relevant in the sixmonth or third stage action plan, with apotential sanction for non-compliance. Werecommend that claimants with debtproblems be referred to support as soonas possible in the claim process – and notunder threat of sanction.

Barriers to work

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Barriers to work

Breaking down the barriers –conclusions andrecommendations

Our research found five key barriers to workfor lone parents:

� Inflexible jobs and employers.

� Lack of access to affordable childcare.

� Inadequate support in making thetransition to sustainable work.

� Being financially worse off in work than onbenefits.

� Inflexibility of the benefit system andmoney problems.

This report shows that the Government isaware of all these problems, and we haveexamined some of the recent measuresdesigned to address them. We welcome mostof them, but feel that the Government doesnot go far enough, and is applying the wrongemphasis. The latest welfare reform proposalsinclude a number of measures to help loneparents into work, but we are concerned thatthey are inappropriately tied to increasedconditionality, and also that the resources willnot match the aspirations of the latest GreenPaper. We particularly emphasise the needfor training to ensure that Jobcentre Plusadvisers are fully equipped to support theproposed reforms.

On employers, we welcome plans to extendthe right for parents to request flexibleworking along with the Government’sattempts to work with employers through theLocal Employment Partnerships scheme, butare concerned about the engagement ofsmaller businesses, especially in a decliningeconomy. We recommend joint effortsbetween DWP and BERR to raiseawareness of employment rights, and toimprove enforcement mechanisms forvulnerable workers.

On childcare, we welcome the requirement forlocal authorities to provide sufficient care, butwe support the recommendations of theDaycare Trust which would make childcarefree to many more low incomehouseholds.

Our evidence suggests that lone parents donot always receive comprehensive advice onhow the transition to work will affect theirfinances. We recommend a joint approachacross DWP, HMRC and local authorities toensure that all relevant advisers aretrained to maximise household income bypromoting take-up of all benefitsregardless of which department deliversthem.

We acknowledge that the Governmentrecognises the need to make work pay butthe current system too often gives helpthrough one mechanism and withdraws itthrough another. We recommend a holisticlook at the interaction of the tax, taxcredit and benefit systems to ensure moresustained financial incentives over thelong term.

It is now well recognised that the complexityof the tax, tax credit and benefits systems actsas a barrier for many people trying to returnto work, and we therefore support the callsfrom both the Work and Pensions SelectCommittee and the Treasury SelectCommittee to set up a Commission whichwould review the welfare system acrossGovernment, with a view to simplifyingthe tax and welfare system and ensuringthat work pays.

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Annex A: Key Jobcentre Plusemployment support for loneparents� New Deal Plus for lone parents: A

voluntary programme specifically designedto help lone parents into work.

� Work-focused interviews: All loneparents who have a youngest child aged13 or under have to take part in sixmonthly work-focused interviews. Thefrequency increases to quarterly in the yearbefore they lose entitlement.

� Job interview guarantee: For every loneparent who is looking for and ready forwork.

� Work trials: Giving lone parents (andother unemployed customers) theopportunity to try out a job for up to15 days without having to give up benefit.

� In-work credit: Paid at £40 a week (£60in London) for 52 weeks to lone parentsleaving benefits for work of 16 hours ormore and also to couple parents in Londonwho are in paid work of 24 hours a week.

� In-work emergency discretionary fund:Provides financial help to lone parents forthe first 26 weeks of their employment, toovercome any unexpected financial barrierswhich might otherwise prevent them fromremaining in their jobs.

� In-work advisory support: FromJobcentre Plus Advisers for all lone parentsin their first 26 weeks of employment tohelp resolve any difficulties, and directindividuals towards any support neededsuch as skills and training.

� Upfront childcare fund pilot: In Londonprovides financial support to lone parentsto cover advance childcare costs such asregistration fees, deposits and advancepayments.

Pilots

� In-work retention pilot: A two-year pilotto test the effectiveness of using In WorkCredit as an aid to job retention andprogression. After a period of weeklypayments to support the transition intowork, lone parents will receive lump sumpayments if they attend further meetingswith a Personal Adviser.

� Better-off in-work credit trial: To ensurethat lone parents (and customers onJobseeker’s Allowance and incapacitybenefit) are at least £25 a week better offin work than they would be on out-of-work benefits. If successful, this will beextended in 2009.

Barriers to work

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Barriers to work

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Written by

Katie Lane

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