{"id":1426,"date":"2020-03-25T12:52:35","date_gmt":"2020-03-25T12:52:35","guid":{"rendered":"http:\/\/blogs.bath.ac.uk\/iprblog\/?p=1426"},"modified":"2020-08-05T12:26:33","modified_gmt":"2020-08-05T11:26:33","slug":"labyrinth-the-covid-19-challenge-for-the-self-employed-and-universal-credit-claimants","status":"publish","type":"post","link":"https:\/\/blogs.bath.ac.uk\/iprblog\/2020\/03\/25\/labyrinth-the-covid-19-challenge-for-the-self-employed-and-universal-credit-claimants\/","title":{"rendered":"Labyrinth: The\u00a0COVID-19 challenge for the self-employed and Universal Credit claimants"},"content":{"rendered":"

Rita Griffiths<\/i><\/a><\/span>\u00a0is a Research Fellow at the University of Bath Institute for Policy Research (IPR).<\/i><\/span><\/p>\n

The emergency package of measures for supporting employees, benefit claimants and the self-employed announced last week by Rishi Sunak<\/a>\u00a0has generally been welcomed<\/a>.<\/span><\/p>\n

With a \u00a320 per week (\u00a386.67 per month) increase in the Universal Credit standard allowance and Working Tax Credit basic element for all new and existing claimants, the Chancellor in a single stroke reversed George Osborne\u2019s four-year freeze on these working-age benefits<\/a> - a freeze which itself followed on from a three-year period when increases were limited to one per cent.<\/span><\/p>\n

This, together with a reversal of the recent cuts to the Local Housing Allowance, the suspension of the minimum income floor for self-employed Universal Credit claimants who are affected, and a relaxation of the conditionality and sanctioning regime, are measures for which many had been lobbying<\/a> long before the present\u00a0<\/span>COVID<\/span>-19 outbreak.<\/span>\u00a0<\/span><\/p>\n

But could the measures have been fairer and more inclusive? And is Universal Credit strong enough to withstand the extra demands likely to be placed on it in the coming weeks and months? Given the generosity and scale of the measures, it may seem churlish to ask whether they go far enough, but with the incomes of many households in free fall, and the social security system likely to come under unprecedented strain, it is right to scrutinise aspects of the offer a little more closely.\u00a0<\/span><\/p>\n

People who are not entitled to\u00a0<\/span>Statutory Sick Pay (SSP)<\/a>\u00a0\u2013 including\u00a0<\/span>employees earning below the lower earnings limit of \u00a3118 per week and the self-employed<\/span>,\u00a0<\/span>who<\/span>\u00a0are\u00a0<\/span>unable to work due to self-isolation or illness -\u00a0<\/span>will be able to claim Universal Credit or<\/span>\u00a0<\/span>\u2019new style\u2019 employment and support allowance (ESA)<\/a> (or in some cases both). Contributory ESA will now be paid from day one, rather than day eight. For self-employed people whose incomes have decreased or ceased altogether as a result of\u00a0<\/span>COVID<\/span>-19, the minimum income floor in Universal Credit has also been temporarily lifted<\/a>. This means that, whereas self-employed people who have been trading for a year are normally assessed as though they are earning the equivalent of 35 hours at the minimum wage (even though actual earnings may be much lower than this), now their actual income will be taken into account for Universal Credit instead.\u00a0<\/span><\/p>\n

So far, so good. However, \u2018new style\u2019 ESA is a contributions-based benefit; only people who have paid sufficient National Insurance contributions within the past two to three years will qualify. Universal Credit, on the other hand, is a means-tested benefit; only those with low household income and savings of less than \u00a316,000 are eligible for help. Though few potential claimants are likely to have this amount of savings, means testing operates at the level of the family unit. For couples who live together, entitlement is assessed against their joint earnings and other income<\/a>. So if the low-paid or self-employed person affected has a working partner, that partner\u2019s earnings, together with any savings they may have, are included in the assessment. Those with dependent children and rent to pay may find they are still entitled to claim, but others - for example, those with no children, a mortgage, and a partner bringing in a decent wage - could find themselves ineligible.<\/span><\/p>\n

Even with the uplift, the financial support available through Universal Credit also appears comparatively paltry when set against the generous financial help that potentially both members of a couple could access as part of\u00a0<\/span>the government-backed job retention scheme<\/a>.\u00a0This unprecedented measure provides\u00a0<\/span>grants to employers to cover 80 per cent of the salary of retained workers up to a maximum of \u00a32,500 a month.\u00a0<\/span><\/p>\n

Furthermore, low-paid and self-employed people are still required to apply for Universal Credit and wait five weeks for payment. Iain Duncan Smith\u2019s disingenuous suggestion<\/a> that it would be simple to reduce the waiting time is simply not feasible under the system of monthly assessment and payment in arrears. As he (and Neil Couling, the civil servant in charge of Universal Credit) have doggedly emphasised in the past, the five-week wait is hard-wired into Universal Credit\u2019s design. While it is true that advances are now payable from day one (of a valid claim)<\/a>,\u00a0unlike the 80 per cent government-backed salary guarantee, Universal Credit advances are loans, not grants, and must be repaid. Repayments can reduce the monthly amount a claimant receives by a significant sum.\u00a0<\/span>So, while low-earning or non-earning Universal Credit claimants are offered repayable loans, employers are provided with non-repayable grants. The familiar mantra that \u2018we are all in this together\u2019 once more has something of a hollow ring.\u00a0<\/span><\/p>\n

Another unwelcome discovery awaiting some new claimants will be deductions taken at source from their Universal Credit payment. Deductions are automated reductions in the award for advance repayments, historical benefit and tax credit overpayments, old Social Fund loans and \u2018third party\u2019 debts, for rent arrears and council tax, for example. And if you are in a couple, you inherit the overpayments and debts of your partner, potentially reducing the Universal Credit payment even further. Nationally, around 60 per cent of current Universal Credit claimants are having their payment reduced by up to 30 per cent of the standard allowance due to deductions<\/a>.\u00a0So while the \u00a320 per week uplift in the standard allowance seems generous, a chunk of it, indeed potentially all of it, could be swallowed up in deductions. Another hugely important proviso to bear in mind is that all these measures are temporary. The uprating of the standard allowance in Universal Credit, for example, is intended to last no more than 12 months.<\/span><\/p>\n

However, to get paid anything from Universal Credit you first need to be in the system, and to be in the system you need to make a valid claim, and a valid claim requires ID verification<\/a>.\u00a0These mainly online processes are not necessarily straightforward, with a series of largely automated hoops that applicants must jump through. Many claimants need support and, even for those able to navigate the system without help, it can take many weeks to make a successful claim, delaying payment further. While telephone applications can be made, Universal Credit contact centres are simply not geared up to handle a deluge of new telephone claims. For some claimants, moreover, ID verification and the need to evidence housing costs require them to present themselves in person at a Jobcentre. Tacit acknowledgement of the impending flood of new claimants is the <\/span>recent announcement<\/span><\/a>\u00a0that senior DWP staff and those from disparate parts of the department are to be redeployed to frontline Jobcentre positions. But how will this work for claimants who need to self-isolate and in the context of the present lockdown?\u00a0\u00a0<\/span><\/p>\n

Further steps that could be easily and swiftly implemented to help support the incomes of the poorest households would be to suspend the policy of deductions for new and existing Universal Credit claimants. When employees are having salaries of up to \u00a32,500 per month underwritten by the government, it seems perverse that, at the same time, some of the poorest members of society are having their benefit payments reduced - for example to repay a loan they may have taken out a decade or more ago to replace a broken-down washing machine.<\/span><\/p>\n

Another simple measure for low- income families with children would be a meaningful increase in Child Benefit<\/a>. Currently paid at the rate of \u00a320.70 per week for the first child and \u00a313.70 per week for any subsequent children, with the lifting of the benefit freeze these rates are due to increase by 1.7 per cent in April this year. This is worth a paltry 35p for families with one child. A more substantial increase is long overdue.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Rita Griffiths\u00a0is a Research Fellow at the University of Bath Institute for Policy Research (IPR). The emergency package of measures for supporting employees, benefit claimants and the self-employed announced last week by Rishi Sunak\u00a0has generally been welcomed. With a \u00a320...<\/p>\n","protected":false},"author":1186,"featured_media":1427,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[137,112,124,129,138,131],"tags":[],"class_list":["post-1426","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-covid-19","category-economics","category-public-services","category-uk-politics","category-universal-credit","category-welfare-and-social-security"],"acf":[],"jetpack_featured_media_url":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-content\/uploads\/sites\/115\/2020\/03\/Untitled-design-29.png","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/posts\/1426","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/users\/1186"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/comments?post=1426"}],"version-history":[{"count":0,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/posts\/1426\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/media\/1427"}],"wp:attachment":[{"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/media?parent=1426"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/categories?post=1426"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/tags?post=1426"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}