Does Universal Credit discriminate against self-employed?

A single mother is taking the government to court over its Universal Credit system, claiming it discriminates against the self-employed and those in flexible roles where their earnings can vary from month to month.

The Independent reports Charmaine Parkin, a single mother of two, was left with just £8.89 to live on in a month meaning she was forced to go to food banks to feed her son and daughter because of the way her payments are calculated by the Department for Work and Pensions (DWP).

She is due to argue in court that she would be financially better off if she gave up work completely, with her lawyer Tessa Gregory, solicitor at law firm Leigh Day, set to argue that if Parkin applied instead for Jobseekers’ Allowance she would have been £393 a month better off.

Parkin claims she is a victim of the system’s minimum income floor (MIF) threshold – used to calculate a self-employed person’s benefits that assumes they have a certain level of earnings, even if their earnings actually dip below this level in some months. 

She claims in her case her caring responsibilities for her two children was assessed as meaning she was able to work 25 hours a week. Her MIF was calculated by multiplying the minimum wage for her age group by these hours, which came to £788.26 a month. As Parkin works in the entertainment industry as an actress, her monthly earnings are variable, but if she earns less than the MIF she is treated as if she did earn £788.26 and her benefits are calculated accordingly. On one particular month she claims she earned just £96 and her Universal Credit payment was cut by £375.64, while in other months she had no earnings and her expenses exceeded her income, while the MIF was still applied.

A Department for Work and Pensions spokeswoman told the Independent it was unable to comment on an ongoing legal case.

Parkin’s solicitor Gregory said in a statement: “According to the government, Universal Credit is supposed to ‘make work pay’. However, the MIF system for the self-employed has left my client feeling like there is no other option but to give up work in order to ensure she has enough money to support her family. 

“This is another flaw in the Universal Credit system, which is leaving people across the country worse off and turning to charities and food banks just to make ends meet. My client is one of the many self-employed people suffering because of the MIF, and the effect is particularly harsh on those who work in industries like the entertainment industry and farming where fluctuations in income are very common.”

Also commenting on the case, Stephen Jennings, partner and solicitor at Tozers Solicitors, told Recruiter while discrimination against people who are self-employed is not itself unlawful, the case could support another type of claim arguing that Universal Credit is so unfair as to amount to an abuse of power, giving rise to a judicial review claim. 

“I would be surprised though if this claim had a wide-ranging impact on others. In any benefit system, there will be some people for whom it works better than others and the facts set out in the article describe problems a very specific set of circumstances.

“Other issues with Universal Credit (eg. the way in which it deals with childcare payments) have also generated headlines recently, leading to even Conservative MPs complaining that it is causing hardship. The next phase of the system’s expansion has been scaled back and, while this may have something to do with the current Brexit chaos, I think the government will be looking at cases like this to see if the rules do need tweaking.”

Jennings concludes that he thinks while there may be tweaks and attempts to address some of the worst excesses of Universal Credit over the next few months, the system as a whole is unlikely to be changed wholesale. 

“The government doesn’t have enough credibility to cope with the reversal of its Universal Credit policy, so I think we can be fairly sure they will be keeping an eye on problems like the one highlighted in this case with a view to possible changes in the future, as and when time (and Brexit!) permit.”

Earlier this week, government announced it is to scale back Universal Credit rollout amid concerns about the system.

The BBC reports MPs were due to vote on whether to move 3m benefit claimants onto Universal Credit in the next few weeks.

But this vote has now been pushed back with Parliament being asked to vote on transferring just 10,000 people to the new benefits system.

Commenting, Jordan Marshall, policy development manager at IPSE, the Association of Independent Professionals and the Self Employed, said: “Self-employed people can be thousands of pounds worse-off each year under Universal Credit compared to full-time employees making a similar amount.

“This is because Universal Credit calculations don’t account for monthly fluctuations in self-employed income.

“IPSE is calling on the government to use the delay in the roll-out to fix these flaws which punish the self-employed.

“Unless the system is reformed, Universal Credit will continue to sap the incentive to run your own self-employed business.”

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