Whatever the outcome of Thursday's General Election, and whatever deals have to be done to form a Government, there is a very good chance that the unemployment figures will start to increase soon afterwards.
Unnoticed by the main-stream media, who have worn their Benefits Street goggles throughout the campaign, and even by most serious Social Security commentators, a change to the Tax Credit regulations took effect earlier this month that poses a major threat to the livelihood of those aspiring entrepreneurs - or brow-beaten job-seekers - who have opted to set up as self-employed, turning their hobbies and dreams into a 'businesses' at the prompting of their Work Coach, and with the safety-net of Working Tax Credit.
There has been too little analysis of the headline figures regarding the growth of self-employment, though a note of caution over the steep fall in average earnings for self-employed people should have indicated that many 'small businesses' are unsustainable without a significant benefit subsidy. Having served their purpose to the Coalition in masking the true level of unemployment and under-employment in the UK, these people are about to have the rug pulled out from under them.
I looked at how Universal Credit threatens one group of self-employed people in the second half of this post but for many existing claimants, UC is still a long way from being reality. Changes are coming their way nonetheless - unluckily for those whose irregular or inconsequential profits are supplemented by Working Tax Credit, HMRC have now adopted ideas enshrined in UC's treatment of the self-employed, and already used to deny benefits to migrants.
HMRC are now reviewing existing Working Tax Credit claims to check that the claimant's work is 'genuine and effective'. This concept first appeared as a safeguard against alleged 'benefit tourism' by EEA citizens and initially applied a common-sense test; does this person's 'job' actually involve doing something that should command a wage? No earnings limit or number of hours were specified, but a judgement was to be made on whether there was bona fide work in progress. More recently, this has shifted to asking 'does this person earn at least the equivalent of the minimum wage for a full-time job?' Where the answer is 'yes', their work is 'genuine and effective.' Where it is not, a doubt arises.
This principle is now to be applied to all Working Tax Credit claims, not simply those from Johnnie (or Joni) Foreigner. The starting point will be the number of hours you have to work to qualify for WTC - 16, 24 or 30, depending on your circumstances. If you earn the equivalent of that number of hours at the minimum wage for your age, your work should automatically be accepted as 'genuine and effective.' Some leeway should be allowed when starting a business. But if HMRC decide you are not, your WTC will stop and you are likely to be left with an overpayment.
As well as being bad news for the creatives I considered in the Universal Credit post in the above.link, this could be disastrous for many taxi drivers, who can wait on ranks for hours at a time and for care workers, receiving mileage but no wage for traveling time.
Those Work Coaches still urging job-seekers to turn hopes and hobbies into jobs may be unaware of this; a colleague reported hearing an interview on a local radio station last week with a lad who had gone 'self-employed' as a busker with the encouragement of his local Job Centre. If he's hoping to top up the contents of his hat up from Working Tax Credit, he may be in for a shock.
Sunday 3 May 2015
Saturday 2 May 2015
Unearned income
My previous post looked at the stealth cuts in Social Security support to unemployed people approaching an ever-receding retirement age, and how this is halving the income of many 'sixty-somethings' and leaving many to contend with issues we tend to think apply to a younger age-group, such as the Bedroom Tax and JSA sanctions.
This post takes a closer look at how the introduction of Universal Credit impinges on people who might have had to end their career before formal retirement age through ill-health, as all the talk from IDS and his minions about how UC will 'make work pay' has conveniently avoided looking too hard at the consequences of bringing in this benefit for people who aren't working, especially those towards the end of their working lives.
If you are 'medically retired', when your Statutory Sick Pay runs out you often qualify for contribution-based Employment and Support Allowance, the benefit which replaced Incapacity Benefit from 2008. It's a 'non means-tested' benefit, so is unaffected by savings or a partner's earnings but, if you have a private pension, contributory ESA is reduced by 50% of the value over £85 per week.
Until the Coalition came to power, it was paid for as long as you were ill enough to qualify for it. In 2011, the present Government shifted the already tight medical goalposts closer together, making it more difficult to score the 15 points needed to have 'Limited Capability for Work' and be eligible for ESA. Then they time-limited contributory ESA for claimants not allocated to the most severely incapacitated 'Support Group' to one year, even if your condition had no chance of improvement and you had no real prospect of working again, saving the hard-working tax-payer around £101 per week per affected claimant - who would themselves have been a hard-working tax-payer had misfortune not intervened, since entitlement contributory ESA relies on an adequate record of NI contributions.
Then we come to Universal Credit. Here's an example of how that impacts someone who has taken 'early retirement':
Ahmed gets an occupational pension of £65 per week, and is also entitled to contribution-based ESA of £101.15* per week, a total of £166.15. Ahmed has to pay £70 per week rent so makes a claim for Housing Benefit. This is calculated by comparing his actual income with what he would get on income-based ESA. Ahmed’s income is £65 per week higher than this. Housing Benefit rules say he should pay at least 65% of that ‘excess income’ (£42.25) towards his rent, but he should get the other £27.75 as Housing Benefit.
*2014/15 figures
This post takes a closer look at how the introduction of Universal Credit impinges on people who might have had to end their career before formal retirement age through ill-health, as all the talk from IDS and his minions about how UC will 'make work pay' has conveniently avoided looking too hard at the consequences of bringing in this benefit for people who aren't working, especially those towards the end of their working lives.
If you are 'medically retired', when your Statutory Sick Pay runs out you often qualify for contribution-based Employment and Support Allowance, the benefit which replaced Incapacity Benefit from 2008. It's a 'non means-tested' benefit, so is unaffected by savings or a partner's earnings but, if you have a private pension, contributory ESA is reduced by 50% of the value over £85 per week.
Until the Coalition came to power, it was paid for as long as you were ill enough to qualify for it. In 2011, the present Government shifted the already tight medical goalposts closer together, making it more difficult to score the 15 points needed to have 'Limited Capability for Work' and be eligible for ESA. Then they time-limited contributory ESA for claimants not allocated to the most severely incapacitated 'Support Group' to one year, even if your condition had no chance of improvement and you had no real prospect of working again, saving the hard-working tax-payer around £101 per week per affected claimant - who would themselves have been a hard-working tax-payer had misfortune not intervened, since entitlement contributory ESA relies on an adequate record of NI contributions.
Then we come to Universal Credit. Here's an example of how that impacts someone who has taken 'early retirement':
Ahmed gets an occupational pension of £65 per week, and is also entitled to contribution-based ESA of £101.15* per week, a total of £166.15. Ahmed has to pay £70 per week rent so makes a claim for Housing Benefit. This is calculated by comparing his actual income with what he would get on income-based ESA. Ahmed’s income is £65 per week higher than this. Housing Benefit rules say he should pay at least 65% of that ‘excess income’ (£42.25) towards his rent, but he should get the other £27.75 as Housing Benefit.
If Ahmed has to claim Universal Credit instead his
housing costs are included in the amount the Government say he needs
to live on - £742.86* per month, including his
housing costs. His income from ESA and pension is £719.99 per month. Unlike Housing Benefit, the 65% ‘taper’ only applies to ‘earned
income’ - any other income is counted in full. Ahmed might argue that he
had ‘earned’ his contribution-based benefit and work pension, but the UC
regulations do not see it that way; both are treated as ‘unearned
income’ and taken into account in full. Ahmed would get the equivalent
of just £5.28 per week Universal Credit, £22.47 per week less help with his rent than he
would get claiming Housing Benefit.
Once again, someone who does not conform to any of the 'scrounger' stereotypes we are shown in the media takes a substantial cut in income due to 'Welfare Reform' and, unless you are that person, you probably know nothing about it.
. Once again, someone who does not conform to any of the 'scrounger' stereotypes we are shown in the media takes a substantial cut in income due to 'Welfare Reform' and, unless you are that person, you probably know nothing about it.
*2014/15 figures
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