Self-employed farmers could be faced with a substantial hole in their finances when the Universal Credit scheme rolls out.
The nub of the issue relates to the calculation of the Minimum Income Floor (MIF) which, for businesses that have been running for more than 12 months, is set at the level of earnings an employed person would be expected to receive for the same hours worked using the National Living Wage or Minimum Wage.
However, Tenant Farmers Association chief executive George Dunn said for self-employed people in the farming industry this was excluding them from their legitimate access to Universal Credit.
“Despite the incredibly long hours often worked by farmers, relatively poor returns to the farming sector have resulted in at least a third of farmers earning less than the National Living Wage and around a quarter are deemed to be below the poverty line,” said Mr Dunn.
Imposing the National Living Wage across the hours worked for these individuals makes them ineligible for Universal Credit.
Mr Dunn said: “The MIF calculated using the National Minimum Wage should only be applied where there is deliberate misrepresentation or manipulation on the part of the individual in making a claim.
“In all other cases, the level of a self-employed claimant’s income should always be based on their taxable profits as reported to HMRC.”
Bill Kerswell, who farms on the Long Mynd, Shropshire, said the move could be disastrous for the industry.
He said: "It could make small farmers bankrupt and homeless, but it is also small businesses and people who live and work in the countryside who will lose out.”
NFU director of policy Andrew Clark said the union had serious concerns about the scheme’s design.
He said by calculating earnings on a ‘crude cash in cash out’ monthly basis and applying a monthly MIF, the system could unfairly impact farmers.
And, due to its ongoing and delayed roll-out, the full impact on farming communities was not yet known, he said.
“Farmers’ income, like many self-employed, can be volatile,” Mr Clark added.
“The flow of their income and outgoings is dictated by having to work with the seasons and things that are outside their control such as late delivery of Basic Payment Scheme or agri-environment payments.
“We acknowledge the Budget announcement to provide additional support for people transferring onto Universal Credit including not applying the Minimum Income Floor for 12 months instead of six months.
“However, we believe a more fundamental review of how self-employment earnings are assessed is still required.”