The Chancellor has missed a ‘golden opportunity’ to address the gaps in Coronavirus support in the Spending Review
On Wednesday 25th November, the Chancellor Rishi Sunak laid out the government’s plans for spending next year. In his Spending Review speech to MPs in the House of Commons, Sunak highlighted the dire economic forecasts by the Office of Budget Responsibility (OBR), which could see the UK economy contract by 11.3 per cent – the sharpest drop in 300 years.
Despite growth returning as restrictions are eased, Sunak pointed out that the UK’s “economic output is not expected to return to pre-crisis level until the fourth quarter of 2022,” with the “economic damage […] likely to be lasting.” He then added: “Our economic emergency has only just begun. So, our immediate priority is to protect people’s lives and livelihoods.”
Sunak explained that the OBR expects unemployment to peak next year at 7.5 per cent (2.6 million people). So among the packages of measures unveiled in the Chancellor’s review was a pledge of £4.6 billion to drive the UK’s economic recovery through creating jobs for the unemployed.
Spending review dubbed ‘inadequate’
Of this £4.6 billion, nearly £3 billion will go towards a three-year Restart Programme, to help those who have been unemployed for over a year, find work. A further £1.6 billion will go towards the kickstart scheme in 2021/22, which is aimed at giving young people six-month work placements.
However, many professional bodies and campaign groups have criticised the Chancellor’s Spending Review, calling it “inadequate” given there was little of note for business owners and the self-employed.
Liz Barclay, CEO at BackinBusiness.org.uk called the statement “inadequate” saying “yet again, the Chancellor has failed to understand the vital role freelancers and small businesses will play in this recovery.”
“The freeze in public sector pay, coupled with the job losses in the private sector and the increase in personal debt, means that the Chancellor has killed off consumer confidence, at a time when it needs to be stimulated. This will hit small businesses hard and as a result, we’re not going to see any innovation, risk-taking or job creation anytime soon.”
Government continues to ignore calls to support excluded
Echoing Barclay’s thoughts was Mike Cherry, Federation of Small Businesses (FSB) Chairman: “A government which claims to be pro-enterprise had very little to say about the importance of business and private sector job creation.
He added: “This Spending Review was a missed opportunity to help small business owners – not least those who have been excluded from support measures. We have put forward proposals for a workable Director’s Income Support Scheme and we need to see them taken forward.”
Seb Maley, CEO at Qdos, was also critical of the Chancellor for failing to address the gaps in government support: “The Chancellor didn’t even acknowledge the gaps in the Coronavirus support in his speech, despite mounting pressure to tailor the help available. I find it remarkable that the government continues to ignore calls to provide millions of freelancers and small business owners with the support they clearly need.”
“The Spending Review marked a golden opportunity to plug the gaping holes in the support packages, which continue to destroy the livelihoods of some of the UK’s most dynamic and important workers.”
The self-employed are the ‘engine of our economy’
Campaign group ExcludedUK described the Chancellor’s responses as “mere fallacies” and added that many are facing “severe hardship” and continue now eight months on without little or no support whatsoever.
And it is not just industry bodies urging the government to help those that have fallen through the cracks. An all-party parliamentary group of MPs recently wrote a letter to Rishi Sunak, calling on him to resolve the problem.
Mel Stride, chair of the committee, wrote: “The committee deeply regrets that the concerns in the first report of our inquiry into the economic impact of Coronavirus, gaps in support, have not been addressed.”
While Sadiq Khan, London Mayor tweeted in response to the review: “It’s appalling that the government has once again failed to recognise the three million people who have fallen through the cracks for financial support. They are the engine of our economy, they deserve better – and I’ll continue to fight their corner.”
Yet again Sunak refuses to support freelancers while continuing to throw eye watering sums at other sectors.
The irony being many have ideal jobs for homeworking and wouldn’t need help without his (crony lobbied) IR35 law.
No company will now engage a small business fearing the wrath of the revenues’ hostile environment.
When this government department can’t be trusted not to “bend” the rules, the sector dies.
What do you propose?
I would propose parity with other sectors since contractors pay more tax then employees it’s only fair.
If you pay more tax than an employee why not pay yourself as an employee.
And save tax!
Perfectly reasonable idea, I must say. Fair’s fair. No decent chap could argue. Now what if contractors weren’t paying more tax? Let me see, that would allow the Chancellor to enjoy your full support wouldn’t it? Good man.
Your ignorance of running a company is showing. You really shouldn’t even be commenting if you have no idea of the issues but here’s a few to start you off:
Corporation tax
VAT
Business risk
Sickness
Holiday pay
Employees national insurance
Employers national insurance
Income tax
Liability
Employee protections
Health insurance
Accountancy
Redundancy
Zero rights employee
Pensions
Invoicing/payments
HMRC hostility
Equipment
Travel
Training
etc.
Spends entire working life avoiding taxes. Expects government to step in to help when going gets tough.
You understand it. The Chancellor is in a market too. He invests in the sectors that will produce a return to the Treasury. The savvy contractors – 10%, say – priced that in to their business continuity planning.
@YingTong Here you go again with the disinformation word salad. Nice you have a “friend” in @Good. Are you the same guy?
Behavioural Insights have been getting a free ride on here for too long.
You’re upset.
You’re disingenuous.
Good luck with the bonus.
Indeed. It is so simple. HMRC guidance for PAYE is ‘to pay enough to cover living needs’. If contractors did this then they would have support linked to the amount of PAYE. But using PAYE involves paying NI (our social tax), used to fund things like Pandemic support schemes, hence if PAYE is avoided and instead Dividend remuneration chosen (which doesn’t attract NI) then you cannot expect support schemes to pay out money to people that effectively circumnavigatie the mechansim that funds these support schemes. Put simply, if you reduce your tax bill by avoiding paying NI, then you also lose benefit that is otherwise accrued. As Ying Tong says – you are probably upset, and with hindsight, if you considered / saw something like this coming, would probably have paid more PAYE/NI and been in a better position.
@Nev – Ah the old “pay all company income to your employees as wages” rouse. That’s not how businesses work and the difference in tax % is now small with new dividend bands anyway.
And forgetting all the other taxes a company pays for a second, how would you set the wages before you know how much (if any) profit you’re going to make.
Your support for “HMRC guidance” gives you away.
Maybe YOU shouldn’t expect hand outs
@Gary it’s crazy as this is the time the country needs the skills and expertise of contractors. We know where Rishi Sunak’s interests are though – his father-in-law’s company ready to hoover up the gaps left by contractor who aren’t able to carry on. So more jobs being lost from the UK.
Not going to comment on Good’s response – it demonstrates such a lack of understanding in this whole area – and its so bad it defies description.
I used to play the system fairly until 9/11 when I was out of work for 12 months. I’d paid all my taxes and didn’t abuse the limited company.
Reward.. I got told no dole as I had money in the bank.. I did it was VAT and taxes to be paid.. Prison sentence if I stole that from the Government. Consequently I received absolutely nothing for 12 months.
Had to sell my car at a loss to feed myself, pay minimum morgage and took me 10 years to clear the debt. Where are my human rights in all this ? and I had contributed well and don’t have kids milking off the state.
Would I fight for the UK.. NEVER!!! I don’t exist therefore I don’t contribute any longer unless absolutely necessary.
2 words : War chest.
Dominic, stop drinking and get yourself back out there. Not quite the same pizazz as “take back control” or “oven ready” but just as meaningless.
@Good – Similarly, why shouldn’t those paid PAYE have their own war chest and expect to be bailed out? Don’t play the PAYE NIC card because HMRC are quite capable (and do) slosh all taxes together. Or are you saying that the NIC fund is coughing up for all the furlough? In which case, why are taxes expected to go sky-high across the board?
As @Gary Andrews has said, contractors pay a truck load in tax, just not in PAYE. For those with income over £50,024, contractors actually pay 3% more in tax (check out ContractorCalculator’s https://www.contractorcalculator.co.uk/comparing_taxes_contractors_versus_employees.aspx).
Why? Because we prefer the lifestyle and actually have expertise which is provided across clients and would go stale and we would get bored being a drone as a perm within a company doing whatever crap they ask us to do.
The calculator does not take into account what the employer of the employee has paid in national insurance on behalf of the employee.
This employers national insurance paid on behalf of the employee is where the ltd company with dividends saves on total paid to government.
This saving on employers national insurance is why contractors pay themselves the way they do.
For each employee, an employer has to pay National Insurance on all earnings above £732.00 per month. The rate of National Insurance is 13.8%. So for an employee earning £5,000.00 in a month the Employer National Insurance would be £599.98 (£5,000.00 – £732 = £4,268 x 13.8% = £588.98).. This is paid by the employer.30 Sept 2020
@MichaelDunne – Your calc looks about right (I’m not going to check it) but comparing an employee to a contractor by pay/rate isn’t a fair comparison for many reasons, your employee NI example is just one.
Contractors are paid more (usually) for the same project, that extra payment is meant to cover lots of expenses a company pays unseen by employees, see my starter list above. I guess you already know this from your educated comment but to be fair comparisons need to be nuanced, something that’s missing from public debate under this government.
And let’s not get into VAT @ 20%, I know, eventully paid by someone else (sometines/partly) a bit like employers NI for employees.
Why would the country be denied “the skills and expertise of contractors” it needs? Surely the “skills and expertise” will continue to be available under a new style of provision? Do you think contractors will abandon IT because of IR35 reform? How would they feed their families, house themselves, run their cars?
@PlumPark & @Steve – I recognise your depictions of contracting under this governments hostile envirinment.
@YingTongs populist cronys will disrupt, distract and embezzle while they can but to build you need engineers.
To contract out the same engineers through an outsourcing company costs 3-30 times the rate with little coming back into the community, country or tax system.
I’ve seen their invoices for the exact same work on same project, shocking
@Ying Tong – The country will be denied because many will have already gone to the wall with no support. Yes, there is a degree of supply and demand but many clients are taking the proverbial, exploiting the misfortune of contractors, a misfortune inflicted by Covid, the govt’s lack of support to this workforce…and IR35 to boot which is a big brake on all of business.
Similarly, you will have no objection then if your org pushes you out and makes you a Zero Rights Employee…which they are quite entitled to do…and will do in years to come. I hope for your sake that you do actually have and add some value.
@Gary – absolutely shocking. £850 for BA’s, £900+ for PMs,.and dont get me started on architect rates,.yet they chase down agency contractors on £350pd,.
It’s happening in all sectors. I’ve seen up to £3,575 per man day (gross) invoices from certain outsourcers left on the printer.
Most of the workers being invoiced for are relitively junior and inexperienced but that just leads to more people per job and even bigger invoices.
Here my two pennies worth.. If I’m ingored I tend not to participate in the group.. Therefore I don’t do track and trace / lockdown or avoid spreading the disease. I don’t exist therefore I can’t be worth anything.
It’s just that lockdown is the law, y’see.
People are desperate.
You oligarchs are bringing back a feudal system where we all become surfs working for our Serco masters.
Are we, by Jove!
Looking forward to next week’s pearls of wisdom already.
Looking forward to you parroting your governments next 3 word slogan.
By jove.
Why wouldn’t I be? Your government has taken our businesses and given them to their offshore cronys.
Read through the comments and the lack of knowledge from the PAYE brigade is shocking
I used to contract but due to the government IR35 closing down the finance sector to freelancers and offshoring the jobs
I was offered a job WITH the offshore company offering 25% of my rate at the time as a salary and being the lowest cost in the team, offshore workers cost £550 a day and frankly were crap
The work I did is now done by a team offshore that’s 1 unemployed UK and 4 employed Indians
Zero tax take for HMRC and I am now on benefits
IR35 the great leveller, I now know how to play the system and on benefits I do not need to return to work
So all’s well in the end. Except PAYE people are now paying for me !!