Welfare Reform Bill — Schedule 1 — Universal credit — Income from Self Employment — 13 Jun 2011 at 22:00

The majority of MPs voted against attempting to explicitly require people’s actual income from self employment, or an estimate of it, be used to assess eligibility for Universal Credit. The alternative described during the debate (and which subsequently ended up in regulations associated with the Act^[1][2]) is a system where those who are self employed are treated as if they earn an amount equivalent to 16 hours work at the minimum wage per week.

The motion voted on was moved by MP Stephen Timms and read^[3]:

• page 103, line 1, after ‘income,’, insert— (ba) a person’s earned income from self-employment,

This would have had an effect on Schedule 1 clause 4(1) which relates to the calculation of capital and income for the purposes of Universal Credit. That clause stated^[4]:

• (1) Regulations may for any purpose of this Part provide for the calculation or estimation of—
• (a) a person’s capital,
• (b) a person’s earned and unearned income, and
• (c) a person’s earned and unearned income in respect of an assessment period

The proposal was to add, between (b) and (c) a further element: “a person’s earned income from self-employment”

Mr Timms described the amendment as being: “on support for self-employed people in universal credit.” [5], he also stated:

• “Schedule 1 provides for a minimum income floor when calculating universal credit for self-employed people. Under that provision, Ministers are making the assumption that self-employed people will be earning at least the minimum wage for every hour they work, but anyone with even a passing knowledge of what is involved in starting up in self-employment will know that that is absurd. While establishing their business, many self-employed people work extraordinarily long hours and earn hardly anything at all, and their income fluctuates hugely month by month. It is absurd to assume that they will earn the minimum wage for every hour they work, and that they should therefore have their universal credit reduced accordingly. That is why the Chartered Institute of Taxation has warned that this new system will be much less supportive of self-employment than the current one.
• Our amendment 27 therefore seeks to align the universal credit definitions of income for self-employed people with those used in the tax system and in tax credits.

It appears that Mr Timms’ amendment sought to prevent what has become regulation 62^[6] of the Universal Credit Regulations 2013, which sets a “minimum income floor” which as it defined by regulation 90(2)^[2] equates to 16 hours per week at the National Minimum Wage.

The problem Mr Timms was seeking to address really appears to arise from Schedule 1 clause 4(3)(a)^[4] which allows regulations to treat people as if they have earned income in certain circumstances whether they actually have earned that income or not. The rejected amendment would still have enabled regulations to be created causing people to be treated as if they had earned income they actually had not; although if the will of the House of Commons was clear in light of contributions to the debate presumably the Government ought to have taken that into account when interpreting the resultant Act.

Other elements of the regulations in relation to payment of Universal Credit to those who are self employed which have subsequently been made^[1] include allowing for a “start up period”, where for a period of one year, an self employed individual is not treated as earning the minimum wage for 16 hours a week.

• [1] Regulations on gainful self-employment
• [2] Regulation 90 of The Universal Credit Regulations 2013
• [3] Official Record, House of Commons, 13 June 2011
• [4] Webpage containing p103 of the version of the Welfare Reform Bill on which the amendment would have had an effect
• [5] Stephen Timms (East Ham, Labour), House of Commons, 13 June 2011
• [6] Regulation 62 of The Universal Credit Regulations 2013

Debate in Parliament | Source |