An actor and her family have been “put below the poverty line” by onerous rules written into the crisis-hit Universal Credit welfare scheme, the High Court heard.
Charmaine Parkin, 34, from Brighton, who has two young children, is challenging Universal Credit rules which apply to people who are “gainfully self-employed”.
Her lawyers argue the actor and her family are financially worse off because of a so-called “minimum income floor” (MIF) used to calculate how much benefit they are entitled to.
In one month Parkin is said to have earned only £96, but was treated as if she had earned £780 due to the MIF.
The MIF requires claimants who are self-employed to prove they are earning at least the equivalent of the full-time minimum wage consistently throughout the year.
It has previously been described as “hidden” and “unfair” because those whose earnings fluctuate during a given year can be penalised. HuffPost UK previously reported how a self-employed Universal Credit claimant was told he would be “better off jobless” due to the rule.
At the start of a two-day hearing in London on Wednesday, Parkin’s barrister Karon Monaghan QC, said: “Many, including the claimant, are seriously adversely impacted by the MIF.
“This is because she, like others, is treated as being in receipt of income that she does not have – sometimes putting her below the poverty line, impacting on both her and her children.”
Monaghan said that, when the Universal Credit system is fully operational, about 190,000 households where at least one person is self-employed will be “adversely financially affected” by the MIF.
Parkin, whose challenge is being brought against Work and Pensions Secretary Amber Rudd, is asking the High Court to quash the MIF rule on the grounds it is unlawfully discriminatory and irrational.
Her lawyers also argue the rule was introduced without compliance with equality laws because its disproportionate effect on women was not taken into account.
Monaghan said the MIF will reduce Universal Credit spending by £1.5 billion compared with where it would have been.
The MIF represents how much a person would earn if they were employed and paid the national minimum wage.
Claims are then assessed based on an assumption they will earn at least that much in a month – which Parkin’s lawyers argue is unfair to self-employed people whose earnings tend to fluctuate.
Parkin, who is also a director, was assessed as being able to work 25 hours a week and her MIF was set at more than £780 a month – which was later increased to about £860.
Her legal team said that one month she earned only £96, but was treated as if she had earned the £780 MIF and her Universal Credit payment was reduced by £375.
Parkin said she would be better off without a job, as an unemployed person in her position would be entitled to an extra £400 a month in benefits and could also apply for reduced council tax.
Speaking ahead of the hearing, she said: “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.”
Lawyers for the government are opposing Parkin’s case and say the policy is designed to support self-employed people on low incomes while also being fair to taxpayers.
James Cornwell, representing Rudd, said: “The MIF was introduced to serve several policy objectives.
“In particular, it is intended to incentivise the growth of earnings among low-earning self-employed Universal Credit claimants and thus promote self-sufficiency among the self-employed and prevent the long-term subsidy by the taxpayer of unprofitable businesses.
“The MIF thus serves to further a fair balance between providing appropriate support to the low-earning self-employed and fairness to the taxpayer.
“[Parkin’s] underlying concern appears to be that she wishes to be subsidised by the taxpayer on a long-term basis to pursue her profession, notwithstanding that it is not generating profits sufficient to support herself and her family.
“There is, however, no right … to be supported by the state in pursuing one’s chosen profession.
“Ultimately, if a person’s self-employed professional activities do not prove sufficiently profitable to support themselves and their family on a long-term basis, they may face a, no doubt potentially difficult, choice to seek better paying work.”
A group of Parkin’s supporters from the actors’ union Equity gathered outside the Royal Courts of Justice before the hearing.
In a statement ahead of the hearing, solicitor Tessa Gregory, of law firm Leigh Day, 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 MIF 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.”
Universal Credit is being introduced in stages across the UK and will eventually replace six benefits including income support, child tax credit and housing benefit.
Other aspects of the scheme have previously been challenged in the courts.
The High Court ruled in January that the Department for Work and Pensions (DWP) had been wrongly assessing income from employment under the new regulations, after four single mothers brought a case against the Government.
Mrs Justice Laing, who is hearing the case, is expected to give her ruling at a later date.
Laing’s ruling could potential have a knock-on impact in other areas of public policy, as the MIF rule has been used by local authorities to change council tax rules.
A DWP spokesperson said: “Universal Credit strikes the balance between supporting self-employment and being fair to the taxpayer.
“And we have made changes to the MIF and New Enterprise Allowance scheme to provide additional support for self-employed claimants.”