Making work pay: single parents and Universal Credit

Background

In 2013, the Coalition Government began to roll out Universal Credit, which combined six separate benefits into one payment. This was done in order to simplify the benefits and tax credits system, and to strengthen incentives to work.

Although the government expects to spend more on the new package, the move to Universal Credit will create winners and losers. Single parent families have been judged to be at particular risk of losing benefit as a result of these changes.

Project aims

• To assess the likely position of single parent households in the distribution of household income in a non-Universal Credit, tax and benefit system
• To estimate marginal effective tax rates facing single parents in work, and participation tax rates facing single parents who are not in work, in a non-Universal Credit, tax and benefit system
• To analyse how all of these change when Universal Credit is introduced; to assess the winners and losers amongst single parents, and to assess how Universal Credit will alter work incentives amongst single parents
• To analyse how adjustments to Universal Credit could be made and what this would cost the Exchequer

Methods

The project assesses the position of lone parent households in the distribution of household income. It estimates marginal effective tax rates facing lone parents in work, and participation tax rates facing lone parents who are not in work. It analyses the impact of Universal Credit and changes to Universal Credit on lone parents both in work and not in work.