MPs make Universal Credit ‘freelancer-friendly’
Influential MPs yesterday confirmed what freelancers have long been saying -- that Universal Credit is “designed with little regard for the reality of self-employed work.”
As a system, UC is therefore at odds with the government’s goal to support entrepreneurship and economic dynamism, and actually poses a “very real risk” to both, the MPs said.
Their main charge is against the ‘Minimum Income Floor’ – the amount that must be earned to be eligible for UC, and where it affects new freelancers getting their business 'off the ground.'
While the MPs on the Commons Committee heard from the Work and Pensions department that a one-year period for start-ups “makes sense,” the committee was not given any supporting evidence.
And no evidence is even planned until April 2019 -- some four years since the full-service roll-out of UC began.
So the MPs want an extension of the 'start-up' period to up to three years, to give newly self-employed people the time and space they need to get their businesses going.
“Giving self-employed people more time to get their enterprises up and running before the income assessments kick in would be a welcome pro-business move,” said IPSE.
A report from the committee also recommends an extension of the monthly MIF period – up to a year -- to help account for fluctuating incomes, which are a feature of self-employed earnings.
“Monthly income reporting requirements punish self-employed people because they fail to account for the uneven nature of their income,” reflected IPSE’s, Chris Bryce.
““Why, for example, should a farmer, who sells or produce crops only at a particular time of year, be penalised? The system of monthly reporting must be relaxed”.
The committee agrees. “Sole traders invoicing on a job-by-job basis may find those jobs take longer than a month, or a late payment can cause variation,” it said in a summary of its recommendations.
“These factors are far from reliable indicators of the viability of a business. Expenses can be similarly volatile. Business spending on capital and other expenses should be driven by business need and affordability: not the need to fit in with UC and the MIF.”
Additional recommendations include the creation of ongoing evaluations of the effect of the new self-employment rules on UC claimants and ensuring front-line Job Centre Plus staff have “sufficient expertise” in self-employment.
The MPs published their report on how UC should be reformed for freelancers after evidence handed to them suggested some self-employed have been up to £3,000 worse-off than employees on a similar income, solely due to the ‘MIF’ calculations.
“Universal Credit has united businesses, unions and the self-employed in opposition against the way the system treats independent professionals,” Mr Bryce said.
“To make this creaking system actually work for the self-employed…we hope the 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.”