Universal Credit ‘penalises the self employed’

The current monthly reporting system of Universal Credit penalises the self employed, according to a new report released today by the Commons Work and Pensions Committee.

The report, ‘Universal Credit: supporting self-employment’, says the system “fails to deliver parity of treatment between employees and the self-employed”. It says that, under the system’s monthly Minimum Income Floor (MIF) calculations, “self-employed people can miss out on important support not because their income is inadequate, but because it is volatile”. The system means self employed people miss out on benefits if they fail to meet the monthly minimum. It is estimated that some self-employed people were up to £3,000 worse off than employees on a similar income because of the monthly calculations because of lost benefits.

The report also calls for a significant extension of the monthly MIF period – up to a year – to help account for fluctuating incomes and for an extension of the ‘start-up period’ built into Universal Credit. Currently set at one year, this is the period new businesses are excluded from the MIF to allow them to get themselves off the ground. The report would like to see this extended to up to three years to give many self-employed people the time and space they need to get their businesses going.

Chris Bryce, CEO of IPSE, the Association of Independent Professionals and the Self-Employed, said: “Universal Credit has united businesses, unions and the self-employed in opposition against the way the system treats independent professionals: Universal Credit just doesn’t work for freelancers and the self-employed.

“Monthly income reporting requirements punish self-employed people because they fail to account for the uneven nature of their income – something the report rightly said was an ‘entirely normal feature of self-employment’.

“Why, for example, should a farmer who sells or produces crops only at a particular time of year, be penalised?

“The system of monthly reporting must be relaxed to ensure the self-employed – who have helped keep unemployment at record lows – receive the support they need.

“Giving self-employed people more time to get their enterprises up and running before the income assessments kick in would also be a welcome pro-business move. We hope Government will take heed of what the Committee is telling them and finally use Universal Credit to give vulnerable self-employed people the support they need.”

Meanwhile, a poll of 550 frontline Department for Work and Pensions staff who are members of the Public and Commercial Services Union said the roll-out of Universal Credit should be stopped, a Channel 4 investigation reveals with 79% stating there was not sufficient staff to meet demand from claimants. The poll was conducted for a Dispatches documentary on Universal Credit.

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