How the Universal Credit system is failing farming families
© Alamy Stock Photo Falling farm incomes mean that many more people are eligible to receive Universal Credit. For some, it is the stigma associated with claiming that puts them off; for others, it is the system itself.
In addition, more farming families could face problems accessing Universal Credit (UC) as income rules begin to affect those who were only recently moved over from the old tax credit system.
Most farm households previously claiming Working Tax Credit were transferred to UC last year and given a 12-month grace period before the Minimum Income Floor (MIF) begins to apply.
See also: How to keep accurate farm accounts to pay the right tax
Once this rule comes into force, the system assumes self-employed claimants earn at least the equivalent of full-time national living wage each month – about £1,700 before tax, based on a 35-hour working week, regardless of their actual income.
If a claimant earns less than this in any given month, their UC entitlement is still calculated as if they had earned that amount, which in some cases can leave them receiving little or no support.
Universal Credit – you may be eligible
There may be a reluctance to claim Universal Credit, and other financial help, but the latest Defra figures show big falls in farming income, so more people are becoming eligible – especially in the arable sector.
Adviser Land Family Business points out that the income ceiling for Universal Credit now stretches well beyond £70,000 for some couples and that an entitlement of just 1p/month can unlock other benefits, so eligibility should be checked.
In addition, the two-child benefit cap was lifted in last autumn’s Budget. The cap limited the child element of Universal Credit claims to a maximum of two children.
Irregular cashflow
Advisers say the system doesn’t take into account the irregular cashflow of most farm businesses, leaving some claimants appearing ineligible for support even when their income is low.
The National Farmers’ Union says many farmers may only now be reaching the stage where the MIF rule begins to affect their claims.
“Universal Credit works on a cash-in, cash-out basis, which isn’t really how farming works,” says NFU tax adviser Michael Parker.
“My fear is the minimum income floor and how that will affect farmers because of the irregular nature of income and expenditure.”
Michael says the NFU has raised concerns with the Department for Work and Pensions (DWP) about issues associated with the rollout of UC for many years, including cases where farmers with seasonal incomes have been told they are not “gainfully self-employed” and need to look for other work.
While the union is continuing to raise issues with the DWP’s stakeholder group, Michael says he is expecting to hear from more NFU members over the coming months as the MIF comes into effect and they suddenly see their UC payments drop.
“We’ve been pushing for changes for some time,” he adds. “What we’re looking for is simply fair treatment so that someone farming in the same circumstances as someone employed would receive the same award over the course of the year.”
In a Facebook group called Universal Credit for Farming Families, which has more than 1,600 members, some claimants are already encountering difficulties with the MIF rules.
In recent posts, one anonymous member says they have given up on their UC claim because it feels like the system is working against them.
“It’s very degrading being told to continuously attend the Job Centre to search for work when you both have full-time work on the farm and struggle to leave at the best of times,” they wrote. “It’s a broken system.”
A second anonymous poster says her partner has been told to look for another job after their combined monthly salaries dipped below £1,000 while she was on maternity leave, despite him working full-time on the family farm.
“We have just started calving so the last thing [he] needs is to be going to our local Job Centre 20 minutes away,” she says. “I’m beginning to think we will more than likely have no choice but to close our claim.”
Keep going
Michael says while it’s frustrating, it’s important farmers don’t give up on making claims if they are eligible for support.
“The worst thing would be to simply drop out,” he says. “When you make a new claim you lose any transitional measures that are supposed to keep your income at the same level as your Working Tax Credit.
“Farmers are entitled to these payments, so hang in with it,” he adds. “If people are having issues, we’d like to hear from them so that – with their permission – we can take them up with the DWP and demonstrate that some of these issues are unfair because of the way [the system’s] been designed.”
Liberal Democrat farming spokesman Tim Farron says UC’s failure to account for the variability of farm incomes has unnecessarily left many families facing financial hardship.
“If this government actually cared about food security, the environment, and our rural economy, then they would change the eligibility rules so that struggling farmers are able to access the support they need and deserve,” he says.
A Department of Work and Pensions spokesman says: “We support millions of self-employed workers like farmers through Universal Credit every year.
“We recognise that farmers are more likely to experience large monthly fluctuations in their earnings and have taken steps to account for this – including a 12-month grace period to give people’s earnings time to adapt, alongside reviewing Universal Credit and looking at how it supports self-employed people.”
Case study: Jackie Jones and Campbell Hill, Looe, Cornwall
Beef and sheep producers Jackie Jones and Campbell Hill farm 113ha near Looe in Cornwall, renting 73ha from the county council and 40ha privately.
In addition to running a flock of 350 ewes, they typically buy-in about 100 milk calves each year, which they fatten and sell on at 12-18 months.
Jackie and Cambell claim about £400 in UC each month. However, because of the seasonal nature of their income, Campbell was told the farm isn’t a viable business and was forced to get a second job last year.
“Campbell does farm work before and after his full-time job at Duchy College – he’s basically doing two jobs, and that’s hard,” says Jackie, who also works as a dinner lady in a local school.
“He doesn’t feel like he’s farming as well as he used to, but we don’t have a choice because the farm can’t keep us at home.”
Jackie says their Working Tax Credit was previously calculated on an annual basis, but the monthly UC assessments have left them uncertain when they’ll next receive support.
“We sold some bulls last month, and that income is rolled over for several months on the UC system, so we’ve no idea if we’ll get any money in March.
“That £400 is whether I can buy heating oil or not. If we don’t get that money the house is going to have to be cold.
“This system is just not fit for purpose for farmers or any kind of seasonal workers,” she adds. “It should look at your income if not for the whole year, then at least over six months or quarterly.
“It’s bringing Campbell down. We never have a day off, we haven’t had a holiday in almost 20 years, and then to be told it’s not a proper business and it’s just a hobby? It’s degrading.”
‘Government should revisit unfair UC system’
Bruce Masson, partner at accountancy firm Larking Gowen, says the government needs to revisit the “problematic” method for calculating UC to make the system fairer for self-employed farmers.
In months where farmers might not receive any income, they are treated as earning the equivalent of a full-time minimum wage and the UC payment may drop to zero, he explains.
After harvest, a monthly income might rise to £20,000, with very few costs, but because the UC submission looks at one month – and not the whole year as an average – the £20,000 is taken as income and the UC will again be zero.
“To add insult to injury, UC may deem that the following months may also be zero due to surplus income in that one month,” he adds. “Surplus income in one month counts against you, but you can’t average your income. It’s clearly not designed for farming or seasonal businesses.”
Lancaster-based Yvonne Coulston, partner at accountancy firm Xeinadin, says many of her clients are reluctant to claim UC because of the complexity of the system.
“Working Tax Credits were a definite amount each month, but with UC you can’t plan,” she says. “The submission of figures is tricky, and then to be told you’re not running a proper business – it’s demoralising.”
With the loss of the Basic Payment Scheme, Yvonne says many farmers are facing considerable uncertainty around their finances, which isn’t helped by the UC system. “It just isn’t set up for farmers,” she adds. “It needs overhauling.”
