Treasury warned self-employed face financial hardship after falling through the cracks in government support
Campaign group ExcludedUK, which was formed in the wake of the pandemic after an estimated three million self-employed people were excluded from emergency support, has written to financial secretary to the Treasury, Jesse Norman, warning that if the government does not rectify the situation, it will hamper the UK’s economic recovery.
The open letter addresses issues with the Coronavirus Job Retention Scheme (CJRS), the Self-Employment Income Support Scheme (SEISS) and universal credit and how the government have failed to support millions working for themselves.
The letter, which was written in response to a previous letter from the MP for Hereford and South Hereford to ExcludedUK, states that Norman “merely reiterated many of the same assertions we have heard from government through this crisis”.
It goes on to say: “We therefore feel it is vital to refocus your attention on those for whom the hardship and impacts felt are only becoming more acute month by month as this matter is simply not going to go away”.
Schemes create ‘significant disparity’ in employment status
The lobbying group highlight that the CJRS and SEISS have created a “significant disparity” between employment statuses. It says many small limited company directors have been “forced to furlough themselves”, receiving minimal income and “at the cost of their business by not being able to work, unlike the criteria for the self-employed”.
It also draws attention to the fact that a person doing the same job in PAYE employment who earns over £50,000 can receive a capped amount of £2,500 a month under CJRS, but if they are self-employed, they receive nothing.
Support to newly self-employed not ‘meaningful’
The Chancellor recently confirmed that around 600,000 newly self-employed people, who submitted their taxes for 2019/20 in January, will now be eligible for SEISS. However, ExcludedUK “categorically dispute” this figure.
The letter states that according to data from the Office for National Statistics (ONS), 151,000 individuals became self-employed between April to December 2019, and therefore it is “logical to estimate” that 200,000 people started working for themselves over the course of the year.
It also pointed to a Treasury Committee report published in June 2020, which acknowledged that in the early stages of a business there are likely to be higher overheads. The group said because the SEISS calculations are based on trading profits, the scheme further discriminates against the newly self-employed and despite now being eligible, the support is not “meaningful”.
ExcludedUK say that around 60 per cent were unable to access universal credit because they either had a partner who is working or they had savings “typically set aside for tax bills” or something else such as housing deposit, wedding or education.
“Universal credit is not the answer, nor can it be deemed meaningful support”, the group wrote as it warned about a spiralling debt crisis.
“We have heard time and again that the schemes were intended to reach those who needed support most. What has resulted is a huge swathe of society, people who were largely self-sufficient yet not necessarily well-off, plunged into debt and poverty and who will remain a burden on the state and who will face a personal debt crisis for years to come.
“We all want to see the economy reopened, but the damage that has been caused by over a year of little to no support for so many is so far-reaching with severe consequences.
Three quarters expected to need debt advice
“We feel that the Treasury must take note and acknowledge these devastating effects on individuals, households, businesses and communities – spiralling debt, careers destroyed, an ever-growing mental health crisis, inequalities for the young, older workers, new parents, exacerbation of precarious working conditions, and the uncertainty that still hangs over so many, particularly those working in the hardest-hit sectors.”
Jane Tully, Director of External Affairs and Partnerships at the Money Advice Trust, the charity that runs Business Debtline, echoed ExcludedUK’s concerns, saying that many self-employed people “face a long road to recovery”.
According to a recent study by the trust, of those who were not eligible for SEISS, a quarter (25%) had fallen behind on one or more bills and more than three quarters (77%) are expected to need debt advice in the next year.
Tully said: “Urgent action is needed to provide a route out of this situation. The government needs to set out a COVID-19 Self-employment Recovery Strategy. This needs to include a dedicated grant fund for those so far excluded from support, including owner/directors.”
Contractor Weekly did approach the Treasury for a comment.