Going Further and Dovetailing Policies to Protect The Vulnerable Self-Employed:
Comment on Sunak’s Deal for the Self-Employed
Professor Julia Rouse, Professor Ashwin Kumar and Rebecca Weicht, Manchester Metropolitan University
Following our early critique of the UK Government’s support (https://www2.mmu.ac.uk/decent-work-and-productivity/news–events/story/?id=12075) and comparison with measures in Germany and Denmark (https://www2.mmu.ac.uk/decent-work-and-productivity/news–events/story/?id=12081), we welcomed the core offer in Rishi Sunak’s policy announcements today for a Self-employment Income Support Scheme (SEISS) https://www.businesssupport.gov.uk/self-employment-income-support-scheme/ in response to the Covid19 crisis.
The 80% deal for the self-employed with a Self-Assessment record will reduce hardship and business failure and support skeleton trading, where this is safe. It will also effectively remove the need for the self-employed to go through the bureaucracy of claiming Employment and Support Allowance for sickness and self-isolation. Both measures seem likely to motivate recipients to comply with social distancing.
As the Government develops Covid19 programmes at pace, we urge it to address five key priorities for further policy development:
- Send a Lifeline to Start-ups by allowing them to file a Self-Assessment return for the 2019-20 tax year early during the month 6 April – 5 May and use this to establish their eligibility for the SEISS so they can also be paid 80% compensation for three months of lost earnings in June 2020.
We believe this measure would deter people fraudulently claiming to be self-employed. First, the eligibility criteria for the SEISS are that self-employment must be the main source of income (excluding most of the employed). Second, reported income would be subject to tax (reducing the fraud incentive). Third, signing a Self-Assessment declaration is a serious legal undertaking.
The Chancellor made bold statements that the self-employed ‘are not forgotten’ and that his scheme will support 95% of the self-employed. Both statements ignore business start-ups, a key driver for innovation and creativity in our economy who are – after all – undertaking an activity strongly encouraged through our education and welfare systems. We believe our proposal to bring forward Self-Assessment and include start-ups could provide the win-win of protecting start-ups and deterring fraud.
- Dovetail the SEISS and Universal Credit. As Universal Credit provides a ‘top up’ to low income assessed on a monthly basis, we are concerned that a concentrated payment under the SEISS may make Universal Credit claimants ineligible for support in June. A mechanism to smooth how the lump sum payment is accounted for under Universal Credit will be necessary and claimants will need information about how the two programmes will dovetail.
- Invest locally to support seasonal traders in our coastal towns and other tourism and hospitality hot spots. They rely on a peak in earnings during the summer months and compensation of 80% of average monthly earnings will disadvantage them. Given the high rates of poverty in our coastal towns, protecting enterprise and incomes against the shock of a slump in summer trade is going to be crucial. Action is needed to support self-employed traders and not just businesses with premises such as hotels, restaurants and shops for whom there are specialist measures in the Government’s SME packages.
- Remain mindful of the precariat who may fall between the cracks of your schemes. Portfolio workers – such as cleaners – who combine insecure employment with part-time self-employment are likely to fall outside of both the Job Retention Scheme and the SEISS. The extra income provided by both activities can be critical to relieving poverty and giving women independent income. Desperation may lead people to defy social distancing. So please keep thinking creatively about how to protect part-time and insecure workers and traders.
- Ensure that high earners excluded from the scheme are able to defer mortgage payments. For the self-employed on £50k who are family breadwinners and live in areas with high cost housing, budgeting may still be very difficult if they are unable to trade. Universal Credit excludes those with savings and does not support mortgage payments. The option to defer mortgage payments may prevent indebtedness or business failure and be vital to sustaining social distancing.
Finally, we fully support the Chancellor’s statement that the self-employed should pay more taxes in order to receive more social protection. Many of the self-employed are on low incomes and did not choose low taxes but found this to be the tax system when they commenced trading. We have previously argued for a higher tax/higher welfare social contract for the self-employed because we perceive that many more need a safety net than tax breaks. We note that revising contributions upwards must mean increasing sickness and maternity/paternity/shared parental leave entitlements for the self-employed so that the higher tax/higher welfare social contract is properly fulfilled.
26 March 2020