The genuine human stories of pandemic financial difficulties for the self employed workers and business owners who have fallen between the cracks of government support certainly deserve an answer sooner rather than later. And before the budget. Why?
Well I can speak from experience as at the time of writing this, I’ve not received one penny. And no, this isn’t about throwing a tantrum because of some poor life and business choices, it’s because at the other end of the scale there are people who are benefiting from tax payers money without ever having needed it, or at worse committing fraud to get ‘free money’ as they look at it.
A report by The Institute for Fiscal Studies (IFS) raises the question of why the government does not just pay extra sums to help some cases on the borders of current programmes.
The Treasury is adamant that the fundamental issue is that, unlike for the furlough scheme, it was not possible to target self-employment support precisely at those who need it. This is a measurement issue. There is no real time way of legally certifying income lost, as exists for PAYE employees.
It occurs months after the event with tax returns. Even if a month’s income could be shown to be below average, which average exactly would it or could it be compared with?
Instead self-employed workers and business owners are required to declare they have lost any amount of income due to CoVid, and provide a basis for usual income from a previously submitted tax return. All then get the entire self employed grant, even if they continue working, indeed even if they continue the vast bulk of their work.
So in this situation is a significant amount of “deadweight” – i.e. the payment of government support to people who don’t actually need it.
The proportion of eligible workers who have claimed this grant is remarkable – approximately 77% according to the National Audit Office – some claimants will have actually increased their overall income as a result of getting the full grant and only suffered a small hit to profits. All of which makes the bitter pill of getting nothing even harder to take and tolerate.
But all this means is that there needed to be a better defined border for the eligibility of the funds. Hence the 50:50 rule, whereby claimants must gain half their income or above from self employment, and the profit cannot be more than £50,000 a year. There were always going to be some very difficult cases at the borders of this policy, and whilst government have been quick to implement policy, they sure as hell are back to their inefficient selves when it comes to tweaking the policies.
The Treasury contends that both these limits compare well internationally and were more generous than small business lobby groups asked for when the scheme was conceived last April. However I still believe that the Government AND the Treasury that whilst sat looking at hundreds of fiscal dashboards on the economy really haven’t got a clue how much and what small businesses actually bring to the UK economy.
But it is absolutely undeniable that there are significant tragic cases of taxpayers denied this type of support. No-one is asking for the world, but hard working small business owners just want a fair shake when it comes to support.
There are “cliff edges” where eligibility for the generous grant simply stops. There are no tapers involved, because the government says that would make the scheme too complicated, (probably for them and not us).
The clearest example of an intervention suggested by the IFS that would help those on modest incomes is to lower the 50:50 rule at the cost of £500m to £800m per quarter.
Overall the government has put together, at speed, a previously unheard of package of support for workers, no doubt about it. And I said earlier I’m not throwing a temper tantrum personally, I’ve put my ‘big boy’ pants on and fought tooth and nail to do what I need to do to keep the lights on.
Some of that support has gone to those that don’t need it and, as a result, lines were drawn that have left some in need on the wrong side.
The government will continue to face pressure to extend these generous support packages. Let’s hope someone, somewhere is watching and actually take action before the budget.
Yesterday, 14th June, the Prime Minister confirmed that the current lockdown restrictions (with some small exceptions) will be extended through until at least the 19th July. This is unlikely to be welcome news to many people. Most of us were looking forward to returning to full normality next week, and now have to wait a little longer. So what now for the self employed and small business owners?
As the dust settles on a Chancellor’s Budget speech that was more an animated short, rather than the summer blockbuster we all hoped for, there is a sense of relief for the majority of self-employed and small business owners around the UK. But there are still over 2 million self-employed and small business owners that are shaking their heads in further frustrations as quite simply, nothing has changed.
Some are saying this is one of the most important budget speeches since World War 2. Others are frustrated at the Governments continuous ‘leaks’ to the press about what’s going to be announced later this afternoon. But there could well be more help for the self-employed which are due to be announced in the Budget, including the possibility of first grants for an estimated 600,000 people.
