High Court to hear universal credit minimum income floor case
A legal challenge to the government's universal credit scheme will be heard in the High Court on Wednesday 17 and Thursday 18 July 2019.
Posted on 15 July 2019
The government claims it wants to ‘make work pay’ but the minimum income floor has the exact opposite effect, causing me and others to believe we would be better off giving up the work we care so passionately about."
Charmaine Parkin, Leigh Day Client
The case relates to the controversial minimum income floor (MIF) which is applied to self-employed claimants of universal credit. The MIF has already been the subject of criticism by the work and pensions select committee and numerous other independent organisations.
The judicial review is being brought by Charmaine Parkin, 34, of Brighton, represented by law firm Leigh Day.
Charmaine is a self-employed actor and director who also has caring responsibilities for her two young children. She argues in her legal case that the application of the MIF to her claim for universal credit has left her worse-off than she would have been if she was unemployed and claiming universal credit.
The MIF is applied to claimants assessed to be gainfully self-employed and is calculated by an assessment of how many hours an individual is expected to be able to work each week (including caring responsibilities and other factors which limit working hours), multiplied by the individual’s national minimum wage for their age group.
The figure represents how much the individual would earn if they were an employed person in similar circumstances and assumes that they will earn at least the minimum wage and work the maximum hours they can every week.
If in a given month an individual earns less than their MIF then their universal credit payment is calculated based on the MIF (e.g. what the DWP assume that person should earn) and not their actual earnings. This leaves self employed claimants (whose earnings often fluctuate) with a shortfall when they do not meet the MIF and can leave an individual significantly worse off than an employed or unemployed counterpart.
Charmaine was assessed as being able to work 25 hours a week, this was multiplied by the minimum wage for her age group to calculate her MIF, which was set at £788.26 each month when she started her judicial review challenge and is now set at £861.11. Every £1.00 of assumed earnings over and above £287 per monthly assessment period reduces a self-employed UC claimant’s award by 63 pence.
The nature of Charmaine’s work means that her earnings fluctuate from month to month. One month she earned only £96 but was treated as if she had earned £788.26 and her Universal Credit payment was reduced by £375.64. In other months she had no earnings and her expenses exceeded her income, but the MIF was still applied.
Despite the government’s repeated assurances that universal credit ‘makes work pay’ Charmaine believes she would be better off unemployed as an unemployed individual in her position would have almost £400 a month more in universal credit and it would give her a stable income which would allow her to apply for reduced council tax.
“I am looking forward to my day in court to present my case as to why the government needs to look again at universal credit, especially for people who are self-employed. The government claims it wants to ‘make work pay’ but the minimum income floor has the exact opposite effect, causing me and others to believe we would be better off giving up the work we care so passionately about in order to secure steady and reliable universal credit payments to support our families.”
Tessa Gregory, solicitor from Leigh Day who represents Charmaine alongside Carolin Ott, said:
“Nearly a sixth of the UK’s workforce is self-employed and so it is vital that we have a welfare system which reflects that reality and provides a safety net for the self-employed. Unfortunately, Universal Credit does not. The Minimum Income Floor appears to be designed to punish the self-employed. It fails to take into account the fact that many businesses and self-employed persons have fluctuating monthly income and instead makes it easy for the government to reduce the monthly benefits of self-employed people when they earn more than their expected income, but refuses to support them by increasing their benefits when they earn less. Our client believes that this is unlawful and is one of the many elements of universal credit that the government must rethink as a matter of urgency.”
Update: High Court rules in favour of Government over universal credit minimum income floor
The legal challenge to the government’s universal credit (UC) scheme heard on 17 and 18 July 2019 has been rejected by the High Court.
The challenge related to the controversial minimum income floor (MIF) which is applied to self-employed claimants of universal credit.
At the hearing in July 2019, Charmaine argued that the MIF was discriminatory, irrational and had been implemented contrary to the Government’s public sector equality duty. However, the judge rejected these arguments and decided that although the MIF does result in a difference in treatment between the self-employed and employed, these groups are not in relevantly analogous circumstances. The High Court also stated that the difference in treatment between the self-employed and employed individuals is not manifestly without reasonable foundation and can therefore be justified.
In her legal case, Charmaine also argued that the effects of the MIF were particularly harsh because it was not possible to escape the MIF by for example opting to accept work-related requirements (which unemployed individuals would normally be subject to). In response to this the High Court stated that Charmaine “could just as well choose to make employment her main activity; if she did so, and continued her self-employment as a side line, she would no longer be subject to the MIF” and if she made even a small amount through employed earnings (the individual threshold) she would not even be subject to work-related requirements.
Tessa Gregory, a solicitor from the human rights team at Leigh Day who represents Charmaine alongside Carolin Ott, said:
“It is disappointing that the High Court has decided to rule in favour of the Government. Universal Credit is failing to provide proper support for the self-employed, which is nearly a sixth of the UK’s workforce. The Minimum Income Floor continues to punish the self-employed who have fluctuating monthly income and runs completely contrary to the Government’s own stated aims of ‘making work pay’ under UC.
"The Court's suggestion that self-employed individuals can simply make employment their main activity whilst continuing their self-employment on the side is not realistic. Many individuals may struggle to find employment and even if they do would struggle to continue their self-employment on the side, particularly if they also have caring responsibilities.
"The sad reality is that the MIF is likely to force many and in particular single parents to give up their self-employment. We hope that the Government will listen to all the concerns that continue to be raised by independent organisations and unions about the MIF and change its approach.”
The Minimum Income Floor continues to punish the self-employed who have fluctuating monthly income and runs completely contrary to the Government’s own stated aims of ‘making work pay’"
Tessa Gregory, solicitor at Leigh Day
Please note that Charmaine Parkin does not wish to be contacted for comment in relation to the case.