Universal Credit: Farmers

Alistair Carmichael Excerpts

Wednesday 24th April 2024 Westminster Hall

[Wendy Chamberlain]

The hon. Gentleman always gets straight to the key issues in his interventions. I will talk about a number of the things that he referenced. Indeed, the monthly aspect of universal credit is one of the key challenges.

Let me start with the basic point: the Government are asking the vast majority of farmers to go through the process of transitioning to universal credit from tax credits now, right in the middle of peak farming months. For example, it is the middle of lambing season. Let me be blunt: sheep farmers do not currently have the time to sort through accounts, visit the jobcentre or have interviews by phone. We all recognise that farming is not a 9 to 5 job where appointments can be scheduled. The sheep three fields down having a difficult birth will not be able to hold on just because the jobcentre is due to call. The farmer who cares deeply for their animals and also cannot afford to lose income if things go wrong will not be able to stay in the farmhouse to wait for that call. They will be down in the field with the sheep to keep an eye on things and intervene if need be. Even if there is a phone signal, which is not always guaranteed, a farmer can hardly talk through the viability of his or her business while elbow deep in that sheep.

I appreciate that that sounds slightly comical, but it is deeply frustrating for farmers and incredibly stressful when they are worried about losing their income. 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.

I recently tabled a written question asking for an impact assessment on how the roll-out of universal credit to farmers has been done. The response—I will be honest—did not exactly answer the question, so I will make the assumption that the answer is no. If I am wrong, I am happy to be corrected on that, and I hope the Minister will use her time to set out the findings from that assessment. But the response I received did point me to the latest findings from the “Move to Universal Credit”, in which there was only one paragraph relevant to farmers—an observation that additional checks on self-employed claimants may be a factor in the low take-up of universal credit. Obviously, that is a part of it, but it somewhat understates the issue, and it also conflates all self-employment businesses. Farming is very different to somebody, for example, running a shop, selling handmade products, or a tradesperson such as a joiner. Here we are: I am going to assume that the Minister has heard the warnings from the NFU, has seen correspondence from MPs, has spoken to farmers herself, has had her officials carry out research into the farming industry, and has seen the media coverage on the radio, specialist farming news and print media.

In any case, 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. I want to go back to that sheep farmer who is busy saving their animals and bringing new ones into the world, rather than speaking to a work coach. That lamb will not be ready for sale until much later in the year, meanwhile the sheep and the lamb will require food, shelter, water, shearing and possibly extra hands on the farm to help out in the busy months. An animal farmer might in some cases try their hardest to grow crops to be harvested in each season, but often that is not practical. Not all areas are suitable for all produce, and even if they were, economies of scale mean that it can be more profitable to specialise. That does not mean there is no work that needs to be done until harvest and sale time; just that the work done by farmers does not get paid for many months. Meanwhile, seed, fertiliser and fuel costs are all going up. That is arguably one of the reasons why some farmers need extra support in the first instance.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

Like my hon. Friend, I have had correspondence with the Government on this issue. The sheep farmer example is a very good one. That sheep farmer will have income, possibly in the autumn from the sale of the sheep, possibly from a basic payment, and possibly from something like the less favoured area support scheme. There might be a small wool cheque at some time in the late summer or early autumn, but apart from that, that is all the income, which then has to be spread and harvested throughout the rest of the year. That is the reality for the sheep farmers to which my hon. Friend refers, and it shows the virtual impossibility of shoehorning that into a universal credit scheme that looks at things on a monthly basis.

[Wendy Chamberlain]

I am grateful to my right hon. Friend, and he has illustrated part of the challenge. We are finding that, when that income spike happens, that is the very point where farmers are losing the benefit to which they should be entitled. It is important to recognise that sometimes it all goes wrong: a really bad harvest; illness among livestock; a year of barely breaking even; or worse. Otherwise, in the main, hopefully all that hard work and waiting pays off and payments come in. After months of very little, there is a significant income boost, and a boost that—as I have just said—will write off universal credit for that month, even though that income boost will have to stretch over the many months until the next sale day.

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 being seen as not real work. Recently, on that very issue, a headline in the Telegraph stated: “Farmers claiming benefits told their farms are ‘hobbies’ and to get jobs”. Some work coaches might understand how farming works, but it is clear that others certainly will not and do not—it cannot be left to luck. I doubt the Department has spare funds to train all work coaches in farming practices, so a standard reform of how income is assessed would surely be a much fairer and efficient path to take.

Another related issue that I will highlight is the imposition of the minimum income floor after the 12-month transition period. I fully accept that there must be measures to stop people being able to potentially manipulate benefits to prop up an unsustainable small or hobby business. Applying a deemed minimum income when calculating universal credit works in those cases, but I seriously question why it is useful to take vital income support away from farming families in those months where their produce is being produced rather than sold. Farmers are not earning the minimum wage in those months, so why on earth are we pretending that they do?

The 12-month transition period is welcome, but the nature of farming will not change in the course of a year. Arguably, all that will do is push the problem down the road, so I urge the Minister to go away and review it. If she is genuinely concerned about farmers exploiting universal credit, there must be other anti-abuse provisions that we could be looking at. The minimum income floor is a blunt tool that is doing more harm than good.

My final point is similar to my first, because after the administrative burden of applying to universal credit, farmers must continue providing monthly income updates. Farmers are not accountants; they often operate in partnerships and, most importantly, they work full time doing the actual farming. Their definition of full time is different from others, because it means well over 12 hours per day, seven days a week. When exactly does the Minister think that farmers will have the time to meet those obligations?

I ask the Minister to not just repeat the same platitudes that have been signed off and sent in a standard letter, which my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael) and I have both received. I have seen that letter shared online many times, and I assure the Minister that it has done nothing to reassure anyone.

The good news for the Minister is that she needs only to look back to the tax credit system to find out what works; she does not need to reinvent the wheel. What farmers need is a system that allows for averaging income over multiple months and years, where benefits are paid during income spikes and where there is no assumed minimum income when it is low. They need a system without the administrative burden of monthly appointments and paperwork, and with an understanding of how farming works and the variety of set-ups, be that tenant farmers, those in partnerships, and everything in between.

It is not just farmers saying that. I have an example from a rural land and property agent, who has published a blog entitled “Why the Universal Credit System Isn’t Working for Farmers”. The Farming Forum threads on the change currently have nine pages of comments on one thread, while another thread has 24 pages. There is a Facebook support group for farming families that has been deliberately kept open so that MPs, journalists and others can see what farmers are saying about this change.

Yesterday, on that Facebook page, someone anonymously posted that because their family were so busy on the farm they could not get to the job centre, and their benefits had been stopped. The writer went on to say, in their own words, that they wanted to chuck themselves off a bridge as a result. A few days before that, someone wrote that they were able to feed their children but they could not afford to eat that day themselves. They used to get £700 in tax credits a month, but the assessment for universal credit does not take into account the difference between income paid to the family and income used to meet farming bills.

The system change means that someone who is producing our food cannot afford to eat. That is just not okay. Farmers are literally the reason why we are here in the Chamber with full stomachs, why our children have the energy to go to school and learn, why we can go to the supermarket and make our dinners tonight and why our restaurants are some of the best in the world. It is not an issue that will go away; it is a crisis for too many farming families. We must support them, and I hope that the Minister’s response recognises the gravity of the situation.

[The Minister for Employment (Jo Churchill)]

It is a pleasure to see you in the Chair, Mrs Murray. Before I respond, I would like to pay tribute to Lord Field, whose passing was announced earlier today. He was a wonderful individual who contributed over many decades to the important issue of welfare. My personal memories are of his kindness and compassion during my early days here. As a former Work and Pensions Committee Chair, I know he would have taken great interest in all the activity happening across the House on welfare issues, not only this week but in the recent past.

I congratulate the hon. Member for North East Fife (Wendy Chamberlain) on securing this debate. First, let me put it on record that the Government recognise the vital contribution of farmers to the country and to the economy as a whole. It is worth the most enormous amount to us, in not only the growing sector, but the manufacturing sector. From my own early days as a young farmer, right through to my representing a rural community, I have been more than embedded, and I understand the challenges. The hon. Lady will know—as I do—that, as with many business areas and sectors, these businesses come in a multitude of forms. Although I appreciate what she said about her farmers lambing, my farmers are trying to get seeds in the ground after the most appalling rainfall. I say gently that they are not the only businesses dealing with fluctuating incomes, transitions throughout their year or lives where they put in 12-hour days. We are working with them, and I agree that that point is important.

For clarity, I met the representatives from the National Farmers Union on 19 March, and I am very grateful to them. As soon as the issue of the migration of those in the farming community from tax credits to universal credit was flagged to me, I reached out to the NFU directly, it responded and we had the meeting to discuss that issue. I cannot answer the specifics that the hon. Lady brought up, but I am interested in them, because the tax credit migration notices have only just gone out, so I am confused as to why there would have been the stories she mentioned. Perhaps if I might be facilitated with those individual challenges, I can make sure they are addressed swiftly.

Officials in my Department are continuing that engagement to ensure that farming communities are communicated with clearly, that the transition to universal credit is as smooth as possible and that the concerns are heard. At official level, I had meetings on 9 and 10 April with officials from my Department and the NFU. Engagement has been constructive. Actions include sharing the third-party information pack on the move to UC with the NFU, which will share it with farming charities—the pack supports welfare rights organisations and charities in understanding the process of making claims and what support is available; the NFU promoting the move to UC activity to the farming community via its regular communication channels; work with the NFU to produce a product for work coaches explaining the farming sector, because I, too, do not like that term; and inviting the NFU external affairs team to a monthly UC stakeholders forum. I have also asked whether we can have somebody with the right expertise at our county shows throughout the country to have a session in the NFU tent, the CLA tent or wherever is appropriate, so that people can have discreet conversations where they are most likely to be facilitated.

The Department is providing that support, including assistance when making a claim for universal credit to those who need it. Importantly, that also includes comprehensive transitional protection if they are eligible. Transitional protection is an extra payment in a customer’s UC award ensuring that their entitlement is not lower than what they would have received on tax credits at the point of movement. Transitional protection is there to smooth the change, which is why individuals should fill in the migration notice when they get it. Importantly, self-employed customers are also exempt from the application of the minimum income floor for a 12-month period, providing significant time for the adjustment to UC to take place.

It is therefore vital that customers take action when the migration notices are received, so that they do not miss out on the important transitional protections we are trying to provide to make sure that a worried customer—today we are talking about farming, but they could come from various other sectors—is helped and managed through the migration. When I discussed this with the NFU in March, it understood the need to avoid delay and indicated that it stood ready to support individuals and ensure they engage.

[Mr Carmichael]

I am sure we can all play a role in ensuring that this transitional relief and the importance of returning the form are understood—doubtless, the NFU and others will do that, too. 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 UC system.

[Jo Churchill]

I thank the right hon. Gentleman for his comments. If he will allow me, I will come on to those shortly. I gently say that he comes from a tourist-driven area, where those incomes for those individuals fluctuate, and we expect them to have moved over to the UC system.

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. I am sure the hon. Member for North East Fife would not disagree with this approach, as it is focused on fairness. We consider each claimant’s circumstances individually, and it is no different for farmers. They are most likely to be considered gainfully self-employed, for the exact reasons she laid out: 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, so it might just be a short meeting over Teams. 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.

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.

Universal credit seeks to take earnings into account in a way that is fair and transparent, with earnings considered in the assessment period in which they are received, with a customer’s award adjusted accordingly. That does mean that individuals are required to report their earnings more frequently than with tax credits and in a slightly different way. However, the system has been designed to be simple and straightforward, with customers needing to provide only the total income from receipts into the business and high-level details of payments out during the assessment period.

While we are debating universal credit and farmers, I gently say that the farming community, as I alluded to earlier, is not the only profession experiencing these large monthly fluctuations, with retail and tourism also doing so. I am sure that the hon. Member for North East Fife agrees that it is important that we work with our farmers, vital as they are to all of us, given the food they put on our plate, to alleviate concerns, overcome barriers and help with the transition to UC.

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.

Universal credit is a broad system of support that takes account of all individual household circumstances. I am a little concerned that the assumption today is that every engagement a farmer might have with the Department for Work and Pensions would be a negative one; that is not the case. Where additional help is available—for example, with childcare or other assistance—individuals will be signposted to the support they are eligible for, which they might not have been aware of prior to making their claim.

Finally, I want to put on record my thanks to the NFU, which swiftly engaged with us when asked and was honest and forthright about the challenges. It has stepped up to working with us. 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.

[Mr Carmichael]

On a point of order, Mrs Murray. It was remiss of me while intervening in the debate not to remind the House of my entry in the Register of Members’ Financial Interests. I hope you will allow me to do so now for the record.

[Mrs Sheryll Murray (in the Chair)]

Absolutely.

Question put and agreed to.