Welfare Reform and Work Bill — House of Lords, 2015-12-14
Topic: Social Welfare
David Freud (Conservative, Centre-right): My Lords, I start by addressing the amendments relating to self-employment, Amendments 61 and 66, tabled by the noble Baroness, Lady Donaghy. Amendment 61 relates to self-employment and the minimum income floor, and how it works within universal credit. Universal credit is there to support those on low incomes and ensure that work always pays. It supports self-employment where it is a realistic route to financial self-sufficiency, alongside other support available to help businesses However, the welfare system is not there to prop up unproductive or loss-making businesses. The minimum income floor is there to incentivise individuals to increase their earnings from their self-employment. Those subject to the minimum income floor are exempt from having to search for or carry out any other work, allowing them to concentrate on making a success of their business and maximising their returns up to and beyond the level of the minimum income floor. I should just point out that the changes to the national living wage mean that the pay of the competitor to the self-employed will go up, so in relative terms they have an opportunity also to increase their pay. The other thing that the minimum income floor does is address a loop-hole in the tax credits system whereby individuals can report little or zero income but still receive full financial support, which is neither a desirable or sustainable situation to maintain Amendment 61 seeks to allow for flexibility in the application of the MIF. This power already exists and provides a number of significant easements on when the MIF is first applied and the level it is set at. The most significant example of this is our exemption from the MIF, for up to 12 months, of claimants who are within one year of starting out in self-employment and are taking active steps to increase their earnings. Monthly reporting allows universal credit to be adjusted on a monthly basis, which ensures that claimants whose income from self-employment falls do not have to wait several months for an increase in their universal credit. Following a report from SSAC, we have put in big disregards on the surplus earnings on a monthly basis. This approach eradicates the overpayment and underpayment issue generated by the current system, which is done on assumed average earnings The noble Baroness was quite right that we need to make this work for particular groups. She picked out Equity, with which we do have regular meetings, to make sure that we understand not so much its concerns as the reality of the working lives of people within Equity and adjust to them. We are testing how to provide support for the self-employed and to help them increase their earnings, employing some specialised work coaches in a trial. We will test all this out as we roll out. The noble Baroness is, of course, well ahead of the game. The number who are self-employed among universal credit claimants is currently low. We need to monitor how all this works, including the implementation of the minimum income floor, as we roll out universal credit with more self-employed in it.