A report from the Resolution Foundation says many self employed people got money from the Government’s support scheme when they didn’t lose earnings as a result of Covid, while half a million got no support at all.
Over 400,000 self-employed workers have claimed support through the Self-Employment Income Support Scheme despite not losing any income during the crisis, while almost 500,000 people still without work have received no support at all, according to a new report from a leading think tank.
The report by the Resolution Foundation to be published later this week says the £12.7 billion support scheme has been poorly targeted and that self-employed workers have experienced an even bigger labour market shock than employed workers.
The report says that at the height of the crisis in April, three-in-ten self-employed workers (30 per cent) stopped working altogether. While work has resumed for many, the pace of recovery for the self-employed has been slow, with around one in six (17 per cent) still without work – rising to almost a quarter (24 per cent) of 18-34 year olds who were self-employed pre-crisis.
The Foundation notes that up until the end of August, the Government has spent more than twice as much supporting each self-employed worker (£2,518) through the SEISS than it has supporting each employee through the Job Retention Scheme (£1,128). However, of the 42 per cent of self-employed workers surveyed who have claimed the SEISS, one in six did so despite having experienced no loss of income throughout the crisis – at a cost of around £1.3 billion. Four-fifths (78 per cent) of SEISS claimants experienced an income loss, although in many cases it will have been smaller than the amount of SEISS claimed.
By contrast, it says two-thirds (67 per cent) of self-employed workers who hadn’t claimed the SEISS have experienced a loss of income during the crisis – and therefore needed support. Close to 500,000 self-employed workers who were still without any work at all in September had received no SEISS support.
The Foundation says that the reason the SEISS has managed to be so expensive and poorly targeted is due to a combination of strict eligibility rules – which excluded many new or higher income self-employed workers from any support – and weak assessment rules – where applicants were not asked to show that they had been hit financially by the crisis.
It is calling for a fundamental reform with fewer exclusions and payments more accurately reflecting income falls.
It adds that, with so many self-employed workers relying on Universal Credit instead, the Government should focus on making the UK’s main safety net work better for these workers. It says this should include extending the suspension of the Minimum Income Floor to stop UC penalising low-earning self-employed workers and suspending the capital rules that prevent self-employed workers with significant savings from being eligible for support.
There is also concern about the tax bills self employed will face this year due to the payment on account scheme. The Financial Times reported on fears that as many as one million self-employed people in the UK could face tax bills bigger than their annual earnings following dramatic drops in income compared to 2019-20. Labour has also highlighted the impact on self employed people of the new SEISS scheme. It says support will fall to just two fifths of their normal income, with the average self-employed person in arts or hospitality receiving just £450 a month through the scheme even if their industry is shut or affected by Tier 2 or 3 restrictions.