Changes to UC in Budget should be permanent

Last week, in his first budget as chancellor, Rishi Sunak announced a £30bn package to tackle the impact of the Covid-19 outbreak. One of the measures included temporarily removing the Minimum Income Floor for Universal Credit claimants, to ensure those on zero-contract hours and the self-employed are not financially worse off if they are forced not to work due to the spread of Coronavirus.

What is the Minimum Income Floor? It is an assumed level of earnings based on what the DWP would expect an employed person to receive in similar circumstances. It's worked out by multiplying the national minimum wage with the number of hours a claimant works.

So, if a claimant is self-employed for more than a year, they are treated as if they are earning a certain amount - the equivalent of someone working 35 hours a week on the National Minimum Wage for their age group - the "Minimum Income Floor".However, the problem with this is that it is fixed for each self-employed claimant despite their earnings going up and down.

So, if an individual does meet the expected earnings threshold (MIF), which is highly likely as income for the self-employed tends to fluctuate from month to month, their welfare payments are not topped up by Universal Credit, meaning they may have to work more to increase their income.

Removing it will take the pressure of those who feel they have to work through the sickness in order to be able to pay the bills.

The wider issue is that the figure that is assumed is simply not achievable on many self-employed jobs, such as cleaning or taxi driving, therefore this calculation needs to be revised as it is not fair that the system assumes a certain income.

We believe that the changes to the Minimum Income Floor highlight fundamental design flaws in the Universal Credit system, and should be permanent so that people can keep more of what they earn and not just put in place in light of the Covid-19 outbreak.

Claimant visits to Jobcentre have also been suspended, and people will no longer be expected to physically attend a centre to receive their benefits and meetings will carried out over the phone or internet. Whilst this change is welcomed, it could also be problematic for vulnerable individuals who do not have mobile phones or access to a computer.

We do, however, welcome the extra financial support announced of £500m hardship fund for local councils, which will help with discretionary housing payments (DHP) for those struggling to pay rent and in reducing overall homelessness.

It is also encouraging to see the government will double the amount of time people have to pay back advance payments, as well as changes in deductions to Universal Credit.However, these changes will not take effect for another 18 months (October 2021) and these are measures that desperately need to be implemented now. We would like to see these measures brought forward from their planned start date, October 2021.

We’re pleased that the government has recognised that changes to Universal Credit are necessary, but it still requires further reform to help people work their way out of poverty and off Universal Credit.

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