Former Secretary of State Iain Duncan Smith has dismissed the Work and Pensions Select Committee’s recommendations for making Universal Credit work better for the self-employed.
Under current rules, self-employed and employed Universal Credit recipients receive the same treatment during their first 12 months as claimants. In year two, however, support for the self-employed is calculated according to the Minimum Income Floor (MIF), which can mean the loss of hundreds of pounds worth of support each month. The committee has recommended extending this start-up period to three years.
On being asked whether the current length of the start-up period is appropriate by the committee earlier today, the ex-Work and Pensions Secretary confirmed that he believes “the year is sufficient”.
FSB National Chairman Mike Cherry said: “The Minimum Income Floor is bad for entrepreneurialism, pure and simple. It generally takes two to three years to get a viable firm off the ground. The Universal Credit system fails to recognise that fact and, in doing so, threatens the futures of successful firms.
“The Work and Pensions committee is right to say that the Minimum Income Floor is “a very real risk” to economic dynamism. The start-up period should be extended to two years at the very least.
“Universal Credit can’t be allowed to go on stinging the newly self-employed after just 12 months. The self-employed generally earn considerably less than employees, especially in the early days of setting up. Universal Credit is a system that encourages users to take a job rather than create one.
“Self-employment is often the best route into industry for those furthest from the labour market. That includes those with caring responsibilities, mental health conditions and physical disabilities. By trying to force these people into employment, Universal Credit is bringing misery to those most in need of support.
“Unfortunately, as the committee notes, Universal Credit tries to force “square pegs into round holes”. By having monthly reporting periods, the whole system favours the employed. Longer reporting periods would make Universal Credit fairer to the self-employed, who often have volatile incomes. The committee’s recommendation that these be made a reality needs to be taken forward without delay.
“On top of all of this, the DWP won’t even be analysing the impacts of Universal Credit on the self-employed until at least Autumn next year. Our hard-working self-employed community deserves better.”