NFU director of policy Andrew Clark gave evidence last week on behalf of members to the Work and Pensions Select Committee, in which he highlighted concerns over the implementation of Universal Credit.
As Universal Credit starts to replace state benefits, Mr Clark emphasised that farm profitability can only be measured over an annual timescale or longer due to irregular cash flows and difficult trading conditions.
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Main concerns revolved around the application of the Minimum Income Floor, which is imposed on self-employed claimants after 12 months of trading and aims to calculate their reward.
Mr Clark said: “As farming activities are generally conducted over an annual cycle and are often dictated by seasonal constraints, most of farmers’ incomes are only received in a few months of the year.
“For those who are self-employed, profitability can fluctuate massively from month to month and continuing to implement the Minimum Income Floor on a monthly basis will disadvantage those with uneven cash flows and result in lower rewards.
“Welfare support in the form of tax credits has provided an essential safety net for some farmers in times of real difficulty, and it is essential that this support continues under Universal Credit.”
Last year it was pointed out by the TFA that hill farmers and other low-paid agricultural workers face being driven off the land because they will lose thousands of pounds a year under universal credit.
Many earn a few thousand pounds a year, yet the new benefits system assumes they earn at least the national minimum wage, equating to £13,644 a year for a full-time worker.
George Dunn, chief executive of the Tenant Farmers Association, said that “despite the incredibly long hours often worked by farmers”, at least a third earn less than the minimum wage.
He wrote to Philip Hammond, the chancellor, last year ahead of the budget, asking him to change the rules and to calculate farmers’ income based on their taxable profits.
A married hill farmer with two children earning £6,000 a year and paying £500 rent is entitled to boost their income to £23,019 with tax credits, child benefit and housing benefit. According to Policy in Practice, a consultancy, this will drop by £3,600 a year under universal credit, as both adults are expected to be working 152 hours a month at minimum wage.
Tim Bonner, chief executive of the Countryside Alliance, has already said that the government was ignoring “huge hidden poverty in the countryside”.
He said: “The impact of policy is rightly considered by race and gender, but it is just as important to monitor the impact on rural communities.”