Millions of self-employed people ineligible for coronavirus support packages face “financial calamity” during the second national lockdown, economists and business groups have warned.
The Institute for Fiscal Studies, a think-tank, this week estimated 18 per cent of people for whom self-employment made up at least half their income were ineligible for the Self-Employment Income Support Scheme (SEISS), the key support scheme for such workers. A total of 38 per cent of those with any self-employment income were ineligible.
Those who cannot claim include people who did not file a 2018-19 tax return because they had just started working for themselves, company directors, those earning more than £50,000 and people who earned less than half their income from self-employment.
The self-employed do not qualify for the government furlough scheme, which chancellor Rishi Sunak on Thursday said would be extended until the end of March.
“There is likely to be a significant fraction of self-employed workers who see significant income losses as a result of the coming lockdown in England but receive little support,” said Tom Waters, a senior research economist at the IFS.
The Treasury has previously said it was unable to support certain self-employed people when it designed SEISS because it lacked the data needed to target funds towards them.
However, pressure is growing on the government to do more to help those excluded from the scheme as it has reimposed pandemic restrictions.
“It is deeply troubling that the government has still not fixed the devastating gaps in SEISS,” said Derek Cribb, chief executive of IPSE, the Association of Independent Professionals and the Self-Employed, a trade body. “Now, those limited company directors and other excluded self-employed who made it through on their savings face financial calamity if they do not get support in this second lockdown.”
The Institute of Directors, the business organisation, called on the Treasury to support directors of small companies through local authority grants.
“The government is still failing to fill the significant gaps in the scheme,” said Roger Barker, IoD director of policy. “Many small company directors continue to go without support. It’s long past time to sort this problem.”
The extension to the SEISS will increase the amount paid from 55 per cent to 80 per cent of average profits (up to £7,500) from November to January.
The government has also extended the suspension of a rule within the universal credit system called the minimum income floor — to boost benefit entitlements for low income self-employed workers.
However there was no additional support for those excluded from the SEISS. And concerns remain about the ability of self-employed people to withstand the drop in income many are facing.
One in five self-employed and contract workers would be unable to survive a week without work and one quarter had less than £2,000 in savings if they were unable to work, according to research this week by LV=, a pensions and protection specialist. Its survey was commissioned before the coronavirus outbreak at the end of 2019.
The IFS research found two-thirds of people who had not claimed SEISS had seen a decline in income and about a sixth were not working at all. Mr Waters said these findings suggested “the [SEISS] eligibility criteria (as well as perhaps non-claiming by those eligible) screened out many people whose incomes had been affected by the crisis.”
The IFS accepted it would have been difficult for the government to include all self-employed people in the SEISS provision, particularly those who did not file a 2018/19 tax return, because of the lack of record in their earnings.
“But the ineligibility of others — those who get less than half their income from self-employment, or who have profits over £50,000 — is a specific policy choice,” Mr Waters added.
The Treasury said it had supported people and businesses across the UK since the pandemic began.
“As the PM announced, it is now clear that much broader restrictions are needed right across the country to contain the virus, so we have extended our financial support across the UK to help millions of people continue to provide for their families.
“Our £200bn response has included paying the wages of millions of furloughed workers and the self-employed, as well as billions more through grants, loans and tax deferrals.”
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