Universal Credit “Crushing” New Businesses

It is easy to assume that the Universal Credit saga is one that only affects those who are out of work for one reason or another, and reliant on benefits to put food on the table and a roof over their heads. However, this is only part of the story.

The benefits system exists to help a variety of people in our society, and while our attention might be focussed on the most needy and vulnerable, the effects of Universal Credit could have broader implications on the economy. According to labour politician Frank Field, that includes the self-employed entrepreneurs who are so critical to getting the economy back on its feet.

More entrepreneurs than ever

The early 21st century will probably be looked on by historians as the age of the entrepreneur. Around five million people, or 15 percent of the British workforce, is now self-employed, and that statistic continues to rise. In part, it is down to the global recession that began in 2008 – as large companies stopped employing and started laying people off, people felt there was everything to gain and nothing to lose in going it alone.

There is also the digital age to thank – from freelance writers and web designers to home-based accountants and marketers, it is easy to set up your own business with very little start up cost. So where does Universal Credit come into the equation and why is it endangering our entrepreneurs?

Showing a profit

The problem is that very few new businesses make money straight away. Most are lucky to break even in the first year, and it takes time and commitment to build them up into viable concerns. During this time, the entrepreneur still needs to eat and provide for his or her family.

Under Universal Credit, however, the business owner must demonstrate that he or she is earning a minimum amount in order to qualify. The idea is to make sure the government is not subsidising unprofitable firms, but according to the Work and Pensions Committee, one year is not long enough to give a new business a fighting chance of success.

Mr Field, who chairs the committee, has lobbied for the government to extend the period to three years, or to “risk crushing potentially viable, productive enterprises.” It would also mean abandoning the investment that the taxpayer has already contributed towards getting the business off the ground.

Operating in the dark

The committee went on to add that the government has provided no evidence that the one-year period provides an adequate indicator of a new business’s long-term viability. At the same time, the DWP will not release any statistics regarding the effect Universal Credit has had on new businesses till next year.

As such, everyone is operating blind, and the committee has urged the government to take a more flexible approach, at least until it can properly analyse what damage is being done to new businesses and the broader economy as a result of its uncompromising stance.

Universal disaster

Whatever angle you approach it from, the Universal Credit system appears to be entirely devoid of any redeeming features. Whether you are unable to work through disability, you are out of work and looking for employment or you are a keen entrepreneur with a great idea for a new business, Universal Credit appears to spell Universal Disaster for all.

Meanwhile, the rollout shows no sign of stopping. If you fall into any of the above categories, or you are worried about how Universal Credit will affect you, please get in touch with us at Hylton Potts.

We have a friendly team on hand, and someone will be only too pleased to discuss your personal circumstances and offer some objective advice. You can give us a call on 020 7381 8111, or email us at law@hylton-potts.com.

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