Thursday, 8 Jun 2023

DWP delays cut to 500,000 insecure workers’ Universal Credit for another year

Benefit chiefs have postponed a planned cut to 500,000 people's Universal Credit for yet another year.

Ministers will put the change on the back burner after being warned it will hit zero-hour workers and the self-employed.

It is the second time a little-known change to people's "surplus earnings" has been delayed, as ministers try to figure out how to make it work.

At the moment, the Department for Work and Pensions (DWP) mostly turns a blind eye to claimants who earning wildly fluctuating amounts from one month to the next.

From April 2018, new rules were due to restrict the amount of Universal Credit these people could claim.

But those new rules were postponed to April 2020 after the government's social security watchdog raised "serious doubts" they would work.

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Today, DWP ministers announced the rules have been postponed for another year to April 2021 – saving claimants from £70million in cuts.

"Around 500,000 fewer people will see their Universal Credit award reduced," minister Will Quince said.

"This will safeguard the efficient administration of Universal Credit."

What is this about?

The obscure rule change was due to hit a large group of people on Universal Credit (UC), the six-benefits-in-one payment that is being rolled out across the country.

Lots of people who claim Universal Credit have a job, but their salary is low enough to be on benefits.

However, if you're self-employed, part time, zero-hour or a 'gig economy' worker, your earnings change from one month to the next.

So in a good month, you might earn too much to claim Universal Credit. But then in the next month you earn less and you have to go back on Universal Credit.

This creates a massive headache for Jobcentre chiefs, who have to work out how to treat you and how much in benefits you should get.

What's the rule change?

In a bid to make things fairer, the government wants to change how it deals with "surplus earnings" – the excess money in months where you earn too much to get UC.

The surplus earnings rule means when you reapply for UC, you have any surplus earnings you've racked up in the previous 6 months taken into account.

So – say you have a bumper month in May and earn £3,000 over the threshold to claim UC. But then in June, you're £300 under it. You still won't get UC.

That's because when you put the two months together, you're still over the threshold by £2,700.

According to the government's logic, you were earning more in May so you should have put some money away for a rainy day. It's your own fault if you haven't got enough cash left.

Why is it controversial?

It might look sensible. But the Social Security Advisory Committee – whose job is to spot problems in new welfare laws – raised three big problems.

Number one: to chip away at a surplus, some people will have to put in a claim every month for UC –knowing full well they won't get it.

Number two: other people, seasonal workers for example, could actually be better off if they DON'T reapply every month.

Say you have a summer job with a big payoff in June, July and August, but terrible pay the rest of the year.

You could come off UC in June, not bother reapplying in July and August, and then when you re-claim in September, you won't have too many surplus earnings to take into account. You basically cheat the system.

Number three, and this is the biggest one. The SSAC said this whole policy is just way too complicated.

How are people supposed to know if they're in group one – who must claim every month – or group two, who are better off the opposite way round?

So what does today's announcement mean?

Today's announcement keeps a big security blanket that was included when the "surplus earnings" policy first kicked in, in 2018.

There is what's known as a 'de minimis' of £2,500 on the policy.

This means that if your surplus is £2,500 or less, the DWP basically ignores it.

That's such a high figure that it only leaves tens of thousands of workers who have to count their surplus earnings – not the hundreds of thousands it'll hit when the "de minimis" finally drops to £300 as planned.

The £2,500 de minimis will now run to 31 March 2021.

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