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.
