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In-work benefits are the next target for the Tory cuts and low paid workers will be mandated to the Jobcentre under Universal Credit.
Esther McVey said:

“we will be working actively with 1 million more claimants who are in work—that is 1 million working claimants who have not been supported to date.”

“…individuals on universal credit who earn less than £12,000 per year on average and who can earn more..”[1]

What the Tories  haven’t said…
  •  Cuts to the Work Allowance so steep that payments are almost eliminated for working claimants with no dependants under Universal Credit.
  • The self employed – without children could lose 100% of basic award and those with children, up to 70%*
  • Workers earning under £12,000 will be mandated to the Jobcentre to address low earning ‘behaviour’ and subject to conditionality and sanctions.
Cuts already in the Welfare Reform Act

Cuts to in-work benefits (currently tax credits) were passed in the Welfare Reform Act in 2013.  In-work conditionality for workers earning less than the (MIF) of £12,000 for employees and £11,000 for self employed workers will be applied under Universal Credit (UC).

Tax credits are to be abolished under Universal Credit (UC) and from 2015, new claims for tax credit will be for UC.  The HMRC have also issued new rules for the self employed  currently claiming working tax credit  in advance of the changeover to UC.

Work Allowance Slashed

The Work Allowance is the amount of earnings allowed before benefits are reduced and this has been cut drastically under Universal Credit.  Currently, under Tax Credit, Workers with no dependants can earn £9,850/yr before their Working Tax Credit is reduced by 41p/£ earned.  Under Universal Credit, they can earn £1,330/yr before benefit is reduced by 61p/£ earned. For claimants with dependant children, the Work Allowance is  higher,  but the amount earned before payments stop is still almost halved.*

Mandated to the Jobcentre
Over 2 million workers could be subject to conditionality and sanctions

All low paid workers will be mandated to the Jobcentre and must sign a claimant commitment form. They will be subject to conditionality and sanctions similar to those for Jobseekers.

‘Under achieving’ employees will be subject to mandatory Jobcentre interventions to address their low earning ‘behaviour’ and must demonstrate that they are trying to earn more. This could be by increasing their hours, taking extra jobs or even leaving their
current job in favour of a better paid one. Failure to co-operate could result in sanctions.

The Self Employed
36.6% of the self employed in the UK earn less than £11,000 and average earnings for self employed women are £9,800 in the UK (2)

The self employed, particularly women, will be hit the hardest, who, if they fail the ‘gainful self employment’ test, [3] may be not be allowed continue their business.  Instead, they must sign up to Jobseekers and look for employment under new UC rules.

“Universal Credit has also developed new policies and procedures to protect the taxpayer from those who declare themselves self employed, yet whose businesses routinely generate little income.” DWP [4]

The self employed must also submit their accounts to the DWP every month, and earn around £910 (the ‘minimum income floor’ equiv. to 35 hrs per week at £6.50 per hour) If they fail to earn this, their UC will be cut. and If they fail to submit their accounts on time their claim will be closed.


These changes could be catastrophic for all workers surviving on low pay topped up by tax credits, particularly those reliant on the housing, child and/or childcare elements.

As the economic recovery appears to depend on people surviving on low earnings topped up by tax credits (part time, zero hours contracts and self employed etc.), these changes are nonsensical, but the the damage they will cause to the low paid and their families is unthinkable….


* based on Work Allowance rates for claimants also awarded the UC housing element.

References

1. Parliamentary Sessions 2014-15, 2nd Delegated Legislation Committee 14.01.15, Draft Universal Credit (Work-Related Requirements) in Work Pilot Scheme and Amendment Regulations 2015: http://www.publications.parliament.uk/pa/cm201415/cmgeneral/deleg2/150114/150114s01.htm

2. Social security provision and the self-employed A study by the Social Security Advisory Committee Occasional Paper No. 13 September 2014 [see Table 2] : https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/358334/Social_security_provision_and_the_self-employed__FINAL_24_SEPT__.pdf

3. Universal Credit and Self Employment, DWP Guide: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/404243/uc-and-self-employment.pdf

4. Universal credit at Work, Department for Work and Pensions, foreword by Iain Duncan Smith MP & Lord David Freud Minister for Welfare Reform, October 2014: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/368805/uc-at-work.pdf

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