Another hit for low-paid workers, one of the hidden benefit cuts making up Osborne’s £12bn, now revealed

Following my post on the further £12bn welfare cuts promised by Osborne if the Tories win, I received an email from one of those persons who read it, Sue Tuke, with some devastating new revelations about how the proposed cuts to Universal Credit when self-employed claimants miss their monthly targets will likely be part of the hidden benefit cuts not yet announced.   She said she felt strongly that people should be warned about this, and I agree.   I am therefore setting out what she, and I, believe is likely to happen, and I am indebted to her for bringing this to my attention.   In effect the Tories are playing the same trick that they used before when they ended Disability Living Allowance (DLA) and replaced it by Personal Independence Payments (PIP): they didn’t dare abolish DLA outright, which was their preferred option, so they introduced an alternative benefit (PIP) subject to stricter conditions, reduced coverage, and at a lower rate.   Now they’re using the introduction of Universal Credit (UC) to do the same thing again: make big cutbacks in Tax Credits which they would prefer to get rid of, but can’t immediately.

The rules of UC are that all workers earning less than £12,000 a year (£230 a week) are required attend Jobcentre interviews and demonstrate activities to increase their income. They are also obliged to sign a claimant commitment form to apply for UC (formerly Tax Credits) in order to provide the Department of Work and Pensions (DWP) with the right to impose sanctions if, in DWP’s opinion, claimants are not trying hard enough to increase their wages (e.g. by working longer hours) which might then take them above the threshold for entitlement to UC.   Clever, eh?

The self-employed, who make up 40% of the jobs the Tories claim to have generated, will be hit hardest.    They will be tested as to whether, in the opinion of DWP officials, they are ‘gainfully self-employed’ and must prove that their earnings are above a ‘minimum income floor’ (MIF) every month.   The MIF is equivalent to 35 hours a week at a minimum hourly rate (approx. £11,000 a year, £212 a week).   If they fail to reach that target in any month, their UC will be cut.   The significance of these figures is that the government’s own Families Resources Survey shows that 37% on average of all self-employed workers earn below £11,000 a year.   So this is a Tory device, not only to replace more generous Tax Credits, but to threaten more than a third of self-employed workers that they likely won’t even get the lower UC rate either.   As the minister, Esther McVey, has said: “If you earn less than the MIF in any month, UC will not bridge that gap.   This will encourage you to grow your business and make sure it can support you”.    Helpful, that.

13 thoughts on “Another hit for low-paid workers, one of the hidden benefit cuts making up Osborne’s £12bn, now revealed

  1. It’s getting harder and harder to know whom to vote for to be honest, the Green are only to the left to win votes but they look like where I will be ending up after a life time in labour and voting labour, and I still pay my political levy to labour must stop that., UKIP is to the right and would be a disaster since we have to many in the right now, with Progress and Tories and the Liberals .

    Would you remind me was it not Gordon Brown who stated DLA was a totally wasted benefit and it should end, then when the Tories and the lefties in labour said no, he said OK for pensioners then, when he lost that did he not try and stop it for the poor souls in care home who only get the care part and that is the only money they get to buy clothes or anything else they need, thankfully he lost that as well.

    I would love to know what Reeves has up her sleeves for the sick the disabled and the working poor after saying labour is the party of the working peoples not welfare or benefits, which means a hell of a lot of people in work are not part of labour plans.

    I think a bit more telling us all what labour would do might be better telling us about the Tories after making statements like that is a bit rich.

    If labour wins the next election what is the betting Miliband asked Freud to come back. It really would be no shock at all.

    Tories and Progress which one would be worse.

  2. Actually I have to slightly disagree with you on a point.
    UC will assume that SE’s are earning the min floor and any top ups will be calculated on that basis, should you earn more then the top up would reduce, but should you earn less the top up will not increase.

    As a large proportion of “SE’s” (and I use the term lightly, most having been pushed into fake se to avoid the DWP, which is already coming back to bite some as HMRC is deciding the “SE” status was “false” and wanting the tax credits back with a threat of prosecution) earn below this min threshold they will be significantly worse off. This part of the policy will mandate that “SE’s” should give up and go on the dole to be better off… another of IDS’s “brilliant” ideas.

    And don’t get me started on the joke that if you earn enough to escape UC totally, should you then have to re-claim it the policy now allows the DWP to take that prior earnings in to account, assume you should have put some under the couch to tide you over, and refuse your UC claim outright.

    I’m sure you have already covered “in work conditionality” and the fact that the DWP can sanction more than the JSA/ESA portion of UC… everything about UC is wrong, from the risk to millions of all payments (not one payment from a single system) not being made should the single system glitch, to the increased sanction-ability of all benefits to everyone working or not, to the fact that for a government that supposedly hates the idea of benefits UC means more people are going to be “benefit dependent” or at least see the fact that things such as CB are “a benefit.”

    And the final kicker… UC will increase the benefit costs by about 16Billion. This because It pays all benefit entitlements, and also saves all Fraud and error payments (a huge assumption).

    Fraud and error, Over payment = -3.4B, under payment = +1.5B = -1.9B over paid.
    WFTC/CTC not claimed = +8.34B (Working/Child tax credits)
    HB not claimed = +6.76B (housing benefit)
    PC not claimed = +3.16B (Pension credit)

    =16.36B Current underspend WILL be paid because UC automatically pays ALL eligible benefits.

    So to save a further 12B the cuts will need to be 28.36B due to the additional 16B of payments that are currently unclaimed…. woooops!

  3. @Robert. The fact that you vote at all is evidence that hope does indeed live eternal in the human breast. I envy you sir.

    As for the DWP:

    “They are also obliged to sign a claimant commitment form to apply for UC (formerly Tax Credits) in order to provide the Department of Work and Pensions (DWP) with the right to impose sanctions if, in DWP’s opinion, claimants are not trying hard enough to increase their wages (e.g. by working longer hours) which might then take them above the threshold for entitlement to UC. Clever, eh?”

    Not clever at all Mr Meacher. The important thing here is the Signature: Consent in presumption. Sly perhaps, as is all legislated statute law.

    Ask. Why do corporate coppers require that you sign a statement?
    Ask. Why must you plead?
    Ask. Why are you required to “stand” in a business venture called a courtroom?

    The whole sham is so tiresome. Requiring coercion rather than respect and genuine consent.

    Vote? No thank you.

  4. I,m a lifelong Green, and CAB worker, but like the fact that any MP is taking these issues seriously. UC will also cut extra amounts for disabled people and remove the disabled worker element of Tax Credits unless someone is unfit for work, (people currently get it if receiving DLA). Haven’t double checked the maths above and how it compares to tax credit thresholds, mayb Mr. Meacher could have a quick chat with his local CAB/Welfare Rights Unit for solid data.
    Id also be concerned over pension changes. If you can draw down a private pension at 55 it can be seized as an assett for bankruptcy and may stop people obtaining a debt releif order as they could use it to clear debts. There is also no clear guidance on how it will be treated for deprivation of capital income if people have to claim Pension Credit.

  5. The other ‘hidden’ big change with the claiment commitment is the much greater conditionality applied to couples under universal credit. Under the present housing benefit/tax credits system as long as one of you is working full-time you are left alone allowing genuine freedom of choice in how households choose to live (one breadwinner model, one full, one part-time, both full-time) regardless of level of income. Under the UC system unless one earner earns the equivalent of two full-time wages (at minimum wage) both parents will be forced to work (in order to maintain their claim) and both full-time if their children are 13. So the party who are supposedly the great defenders of ‘traditional’ family life and freedom of choice are effectively ending these things for millions of households and further punishing the under-40’s for things they had nothing to do with – banking crises, massively high house prices, poor wage growth, the very things that cause them to require welfare subsidies in the first place rather than being self-reliant homeowners like their babyboomer parents who were able to buy family homes and raise their own children on one wage.

  6. Largely agree with both of the above; Post Blair, the Labor party has been turned in little more than an exclusive social club to promote the interests of millionaire property speculators and their families, so what the point of them is now for most people, particularly if you’re not in work, (for whatever reason,) now escapes me completely.

    I has recently emerged, (like bad small from a sewer,) that Ed Miliband’s personal nett worth is probably over £ 5 million, including that infamous London Mansion valued at around 2.6 million, in response to which, one particularly sycophantic article that I read recently even tries to argue that; well £ 5 Million is really not that much anyway.

    Seriously ?

  7. Hum its seems others are starting to wake up about uc working claiming any benefits one can be called into the local jcp and asked why or how you going to get off benefits lovely isnt it another way to sanction you or your partner but wait untill we hear the taxman calling on self employed when their year ends how much they say to little so please pay back those benefits we paid you bet jcp staff didnt tell those they talked into going se labour or little tories has we now them have been inandated with blair babies we now has above are they going to kick the poor has big companies the rich one percent who are all left off paying their taxes so the poor do if thats the case wave goodbye to these companies and put the local councils back incharge stopping the monies going to offshore accounts bringing more jobs back but would you has a party do this I think not big companies we see have taking over democracy jeff3

  8. A bit off the beaten track for many people this, but good news in it’s way; CERN is restarting it’s physics experiments again, (still flushed with their massive success in finally confirming the existence of the Higgs boson.)

    It’s often difficult to justify weird stuff like this to people, (in fact typically Thatcher pulled us out of CERN,) that has no obvious or immediate practical application and is incredibly difficult for most people even to understand, but nonetheless this is some of most culturally and scientifically important research being carried out anywhere in world today.

    It’s also something to leave to our grandchildren, as Issac Newton said, “If I saw further than anyone before, me it’s because I stood on shoulders of giants.”

  9. I seem to be stuck in moderation.

    If any of my points are incorrect please feel free to point out the errors.

    Post stuck in moderation >>>>>>>>

    Jonathan Wilson
    April 2, 2015 at 2:32 pm

    Your comment is awaiting moderation.

    Actually I have to slightly disagree with you on a point.
    UC will assume that SE’s are earning the min floor and any top ups will be calculat

  10. If your self employed you get 3 good weeks of sales and then 1 bad week of sales. However hard you work, you can’t guarantee to make the £200 per week DWP target. Once this minimum income floor is introduced tens of thousands will be forced to close their businesses and into the JSA/looking for employee type work system in order to keep a roof over their heads. A terrible waste as think of the money the self employed spend in the economy, the self employed minimum income floor needs to be repealed. Especially considering rents are unreasonably high due to the national housing crisis.

  11. This hit me over the head this weekend like a brick from hades , HMRC received my Tax Credit renewal on 24th April and sat on it, (Claiming as self employed since 2009) Yesterday got a letter from Concentrix demanding I prove my self employment and provide them with a half kilo of printed documentation in the process (I weighed it) or else. I’m Disabled (was born with brain and developmental issues and have pretty poor health) The stress this has put me under has been a massive burden, I’ve suffered chest pains, stress and a IBS attack, I also have a blood clot in my leg that has plagued me for months. I don’t need this at all and the entire weekend have proven unproductive both personally and for my business as I ran around like a sick headless chicken trying to sort this out. I don’t quite understand their reasoning if they suddenly boot all the low end truly self employed people and make them unemployed how does that balance the books? People like myself will end up on ESA instead and be bigger burden on the tax payer. I just want to try pay my own way but can’t do that with the rug pulled from under me.

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