Tax credit u-turn will not stop cash going wrong way; Families still face hardship.
Byline: TRICIA PHILLIPS
MILLIONS of families will have given a huge sigh of relief as George Osborne made his U-turn on the proposed tax credit cuts.
But there are still tough times ahead for those on lower incomes as we move towards the rollout of the universal credit system.
Like anything to do with the benefits system, it is complicated and currently very puzzling.
Families on tax credits are set to be given what the Government calls 'transitional protection' which means in effect that they will be no worse off when they move over to it.
That is unless their circumstances change, such as their income or working hours or having another child.
And, of course, they will be hit via the benefit freeze because their incomes simply won't keep up with the rising cost of living.
Families who make new claims under universal credit will feel the full force of the welfare cuts.
According to single parent charity Gingerbread, the decrease in the work allowance under universal credit - which was announced in the summer but not mentioned in the recent Autumn Statement - is expected to take an average PS800 a year from a million working single-parent families.
Working single parents in the poorest fifth of households are set to lose the most - an average 7% of their income or the same as almost a month's salary.
Then there is the proposed cut to end the higher rate family element of tax credits - the extra bit in recognition that looking after one child can be more expensive than looking after two (cots, prams and clothes can be passed on to second and third children).
This and restricting the child element to the first two children will see the average working single parent lose an average PS300 a year.
Fiona Weir, chief of Gingerbread, said: "We're pleased the Chancellor decided to scrap many of the planned cuts to tax credits.
"But many families still face losing money in the long run as the shift towards universal credit take place.
"Although the idea was that this new system would mean that it always pays to work, changes outlined by the Chancellor earlier this year mean many working single parents will be worse off than they would have been under tax credits.
"In particular, via plans to limit the amount you can earn before universal credit starts to be reduced. And scrapping the extra cash given to parents for their first baby will see many families getting less support under universal credit than they would have had under tax credits."
The proposed cuts to universal credit are contained in the Welfare Bill/universal credit statutory instrument which are now going through parliament.
So they could be subject to revision, for which Gingerbread is continuing to push hard.
And the detail about the move from the current tax credits system to universal credit is still unclear, so there remains the concern that existing claimants could still lose out.
Fiona added: "The Chancellor has already changed his mind once when it comes to support for low-income families. We're urging that he thinks twice."
If you are a single parent, you will find lots of advice and guidance on benefits and other financial issues at gingerbread.org.uk