Universal Credit causing chaos for the self-employed

Universal Credit causing chaos for the self-employed

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"Devastating impact”, “degrading”, “fundamentally wrong”, “causing hardship and stress”. Just some of the public criticisms of Universal Credit. So, what is happening with Universal Credit – and perhaps most relevant for this magazine – why is it harming the self-employed so much? 

Best to start with the basics: Universal Credit is essentially the amalgamtion of almost all the means-tested benefits into one payment. That includes Employment and Support Allowance, Income Support, Jobseeker’s Allowance, Housing Benefit, Working Tax Credit and Child Tax Credit. It was originally announced in 2010 by former work and pensions secretary Iain Duncan Smith, who claimed it would bring “fairness and simplicity” to the social security system.

The government began gradually rolling out the new system in 2013, starting with the least complex cases: single adults without any housing costs. The system quickly ran into difficulties, however – especially as they tried to extend it to more complex cases. There have been many complaints about the basic structure of the system, but the most pressing have been about its implementation.

Official figures show 24 per cent of new claimants having to wait more than six weeks for their first full payment – time, which cashstrapped claimants simply don’t have. It led to widespread reports of people falling behind with their rent, struggling with day-to-day expenses and even being driven to foodbanks.

It wasn’t just the implementation, though: campaigners have also claimed that in practice, merging the different benefits leads to significant cuts. In fact, it is argued that even after the implementation problems are smoothed out, the new structure could leave some families up to £200 worse off a month.

Then, of course, there are the self-employed. As IPSE (the Association of Independent Professionals and the Self-Employed) has said, Universal Credit “simply does not work for them”.

“It penalises the self-employed for their way of working.”

This is essentially because at the moment, Universal Credit is calculated based on monthly income recording, and this completely fails to account for self-employed people’s fluctuating incomes. As a result, freelancers, it has been calculated, can lose out on up to £3,000 a year. Many simply cannot afford to miss out on sums like that.

For self-employed and employees alike, the ‘teething problems’ continued after 2013. And in 2015, instead of allocating more funds to smooth out the problems, the then chancellor George Osborne announced £5 billion of cuts in the coming years.

The implementation problems got worse, with more and more horror stories emerging – particularly through media campaigns like the Daily Mirror’s ‘Stop Universal Credit’. Widely published reports emerged of people being forced to eat from bins, scavenge old hospital food and even shoplift.

Only recently, there was a front-page story in the Daily Mirror about a nine-year-old begging for work after her parents died – because she had fallen through the cracks in this creaking system.

Gordon Brown publicly commented in October: “Surely the greatest burning injustice of all is children having to go to school ill-clad and hungry. It is the poverty of the innocent – of children too young to know they are not to blame. But the Conservative government lit the torch of this burning injustice and they continue to fan the flames.”

The furore escalated this year, not only because of criticism from public figures like Brown, but also because of remarkable gaffes from the government itself. Last month, Esther McVey, the then secretary of state for work and pensions and the minister in charge of Universal Credit, infamously admitted that “some people will be worse off” because of the new system.

In response to the barrage of criticism, in the Autumn 2018 Budget, chancellor Philip Hammond allocated £3.1 billion to help people affected by the Universal Credit delay. Nothing, however, was said about rectifying the system’s fundamental bias against the self-employed.

That’s why a number of organisations, including IPSE, are urgently calling for a halt to the roll-out of Universal Credit while this and the enormous bureaucratic problems with the system are resolved. Will the government listen? That remains to be seen...