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.