DWP speaks out as Universal Credit rules branded a 'failure' for farming families

The Department for Work and Pensions has issued a new response after the move to Universal Credit was branded a 'failure' for the farming community. Families forced to transfer from tax credits say Universal Credit's monthly assessment and payment system doesn't reflect the huge variation in their income across the agricultural year.

In a House of Commons debate on April 24, Wendy Chamberlain (Liberal Democrat MP for North East Fife) said: "I will explain why Universal Credit fails farmers. Universal Credit does not account for variable incomes and does not allow for those incomes to be averaged out. The very nature of farming means that farming income varies significantly through the year, or even over multiple years."

She went on to stress the inadequacies of the new system compared to the old: "Tax credits allowed farmers to average out their income over a multiple-year cycle to truly reflect their monthly income over time. Universal Credit only takes a one-month snapshot, and I know that people have experienced difficulties with Universal Credit in occupations such as farming for that very reason. Given that work coaches are required to assess whether self-employment is gainful, there is a significant risk of months of loss not being seen as real work."

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She added that Universal Credit was "deeply frustrating for farmers and incredibly stressful when they are worried about losing their income." Ms Chamberlain also questioned the Government's consideration of farmers in the decision-making process, saying: "It shows a failure within the DWP system to understand how farming works, so I ask the Minister: what thought and consideration was given to farmers when the decision to roll out the transition to Universal Credit was made?

"I know the National Farmers Union raised concerns about the transition as early as 2018 in evidence to the Work and Pensions Committee. Did the Government pay any attention to that? Even if they are talking to the NFU, I cannot see the outcome in those policy decisions."

How have farmers been hit by Universal Credit self-employment rules?

A Facebook group called Universal Credit for Farming Families has been set up for people to help each other and share their experiences and in February the trade publication Farmers Weekly said many people making the move had found it a "nightmare" because of the rules for self-employed claimants.

For farmers, some months don't produce any income until grain or livestock has been sold. But the self-employment rules of Universal Credit set what's called a minimum income floor. This is essentially an estimate of what someone employed in a similar capacity would earn at the National Living Wage or National Minimum Wage, after deductions such as tax and National Insurance.

If you're earning more than the minimum income floor, your Universal Credit payment will be calculated based on your actual earnings. However, if you earn less, your Universal Credit payment for that month takes a nosedive because it's calculated based on the higher assumed level of the minimum income floor.

Jim Shannon (Democratic Unionist Party MP for Strangford) told the debate: "Farmers may have three good months of income - not necessarily profit - followed by nine months of hardship, so the monthly system is not appropriate for their seasonal work. Rather than making farming viable, the Government aid through the Universal Credit system may put people off and make farming untenable for families. That is incredibly concerning as it affects our food security, which this debate is also about - food security and delivering for the nation."

DWP Employment Minister Jo Churchill told the debate she met with the National Farmers Union in March to tackle any issues with people migrating to Universal Credit. She says DWP officials have kept lines of communication open with farming representatives so the transfer to Universal Credit is as smooth as possible.

Ms Churchill added that transitional protection is available when starting a claim for Universal Credit so that lower payments can be topped up to what they were on tax credits. She also pointed out that self-employed workers making the move to Universal Credit are exempt from the minimum income floor for 12 months, "providing significant time for the adjustment to Universal Credit to take place."

Alistair Carmichael (Liberal Democrat, Orkney and Shetland) said: "The difficulty I have, however, is that even at the end of that transitional period, I do not see what in the farming business model will have changed. There will still be self-employed people with income coming in significant sums, but at small points in the year. At the end of the transition, we will still be where we are today - that will not change. If there is going to be change, it must come from the Universal Credit system."

DWP explains Universal Credit changeover process for farmers

Responding to the issues raised, Ms Churchill said: "With regard to self-employment, Universal Credit addresses a number of flaws with the tax credit system. The Government stand by these reforms, which were first introduced in 2013.

"To give context, self-employed individuals have previously been able to report very low earnings from their business activity while receiving much of their income from tax credits. That can act as a disincentive to grow a business or look elsewhere for employment, if a business is not viable.

"All of us in this room know that businesses vary in their viability. This is an arguably unfair situation for the taxpayer and risks trapping individuals in low-earning self-employment and thereby, in some instances, more of a dependency on the welfare system.

"All customers moving to Universal Credit, including farmers, are asked and expected to attend a one-off meeting with a work coach to confirm their employment status. This means confirming that farming is their main employment, being regular, organised and developed, and trying to making a profit - not that it has to, but just that it is their main job."

She explained: "We consider each claimant's circumstances individually, and it is no different for farmers. They are most likely to be considered gainfully self-employed. They have livestock, they have to be there every single day, or they have crops to grow and so on. They will therefore be free to work on their business with no expectation to look for other work or take it up while in receipt of Universal Credit.

"During a farmer’s first year in receipt of the new benefit, they might be expected to meet their work coach up to four times more, but to minimise this, multiple appointment channels are available, which I am assured includes digital. With all due respect, that is not any more onerous than engaging with a feed supplier or with accountants.

"After 12 months, the minimum income floor is applied, and no further work coach interactions are required if an individual's or a household’s circumstances stay the same. Again, once established - that is what the transition period is about - that stability is carried through."

The minister continued: "I know that concerns have been expressed about the impacts on farmers through the way their earnings are reported and the administrative burden that this might cause, but I would like to reassure hon. and right hon. Members that my officials are working with the NFU to better understand whether farmers are worrying about this challenge in anticipation, or whether there are things we can do to assist.

"That includes the NFU's attendance at monthly stakeholder engagement sessions and our offering to speak at NFU events. It is not to anyone's benefit to have people worried in this situation."

Ms Churchill further explained: "Assessing earnings monthly rather than annually may have a greater impact on all self-employed people with large monthly fluctuations, but steps have been taken to account for that. Where a self-employed customer reports a loss, the value of the loss is carried forward and taken into account when assessing earnings in future assessment periods.

"Similarly, when customers experience a spike in their earnings, only earnings that have exceeded £2,500 more than the amount that would normally reduce their Universal Credit award to zero will be carried forward to affect a future assessment period.

"I hope that we can work together to assist the broader farming community, which is hugely important to the nation. I strongly encourage people to engage with the migration notice so that they can access the support and income protection as we make the move to Universal Credit." You can see the full debate on Universal Credit and farming here.

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