Start-up businesses could be 'crushed' by Universal Credit system - MPs
2 min read
Start-up businesses and seasonal workers could be “crushed” by the controversial Universal Credit system, a powerful group of MPs has warned.
Entrepreneurs who fail to meet a “minimum income” from their business after a year could be forced to pack up and find work elsewhere under the benefit rules, according to the Work and Pensions Committee.
Meanwhile, seasonal workers or others without steady incomes could be hit to the tune of thousands of pounds because of the way their benefits are calculated, the MPs said in a new report.
Labour MP and committee chair Frank Field fumed: “Universal Credit was not designed with self-employment in mind and it shows.
“Its current setup for people starting and running their own business risks crushing potentially viable, productive enterprises.”
Entrepreneurs are currently allowed to claim Universal Credit for a year to help get a new business off the ground - but MPs have said the “start-up period” should be extended to three years.
Those who have been self employed for a year or more and earn the equivalent of at least 35 hours on the minimum wage each month will see their earnings topped up by Universal Credit.
But those who earn less than the so-called minimum income floor will not have the difference plugged by the benefit system.
The rules are in place to stop the taxpayer funding an unviable business on an indefinite basis.
A spokesperson for the Department for Work and Pensions said: “We recognise the important role of entrepreneurs in boosting the economy, however it’s unsustainable for Universal Credit to prop up unviable businesses that may not be working.
“Universal Credit strikes the right balance between helping new businesses and being fair to the taxpayer by supporting self-employed people during the first year while they establish their business.
“After the initial year, gainfully self-employed people are treated as if they are earning the minimum wage.
“If they are not and they want to maintain the same level of income, they will be expected to increase their earnings rather than relying on their UC payment.”
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