Findings of new research from Citizens Advice on the effects of Universal Credit will be a shock to many self-employed people. They should also worry policy-makers keen to support self-sufficiency and a strong jobs market.
The self-employed make up a significant proportion of people who qualify for in-work benefits. Their earnings are typically lower than those in standard employment partly because more of them work part-time or have a health condition or disability.
It’s now clear that 3 different elements of UC in combination could mean a big cut in financial help offered to self-employed people moving on to the benefit.
The 3 – the gainful self-employment test, Minimum Income Floor and surplus earnings test – are intended to prevent fraud and encourage commitment. But, like other aspects of UC, they are largely untested.
The research, which also looks at the impact of UC on other modern kinds of employment, shows how benefit reductions are leaving insecure families dependent on food banks. The MIF alone, according to the Office of Budget Responsibility, will mean losses for 400,000 claimants, and the DWP says the policy could be saving £1.5bn by 2021-22.
The rules that make up UC are hard to understand which is a big problem. But, worse, they also seem inflexible and arbitrary – the MIF, for example, demands a minimum monthly income regardless of the natural variability of self-employment income.
Citizens Advice recommendations are: to carry out a thorough review of MIF with option of replacing it if necessary; introduce new training for Job Centre work coaches who deal with the self-employed; and provide options for the self-employed to report and prove income online.
Universal Credit and Modern Employment: Non-traditional work Citizens Advice, April 2018