IPSE sets out case for more support for self-employed in latest Treasury Committee evidence
- 25 Jun 2020
This week IPSE submitted our latest evidence to the Treasury Select Committee’s inquiry into the economic impact of the coronavirus. The committee, chaired by the Conservative MP Mel Stride, is an influential voice in Westminster.
Back in April, IPSE’s Policy Director Andy Chamberlain gave oral evidence directly to the MPs who sit on the committee. In his evidence, Andy highlighted the plight of limited company directors who had been excluded from the government’s main packages of support, as well as the other groups who have missed out like the newly self-employed.
Last week, our campaign for more support for these hard-working freelancers was boosted when the committee published its interim report for its inquiry. We were pleased to see interim report back up our calls directly, stating:
“The government must assist these people if it is to completely fulfil its promise to do whatever it takes to protect people from the economic impact of coronavirus…The Government must find a practical solution to supporting the many limited company directors who are missing out on support because they pay themselves in dividends. IPSE has presented the Treasury with a ready-made solution and we urge the Government to accept and implement this proposal.”
While we do not expect many changes to the Committee’s findings in its final report, our latest submission of evidence has re-emphasised the points we have been making since April. While the full submission will be available to view shortly, here is a summary of the main points:
Freelancers are being hardest hit by the coronavirus economic fallout
We now have a range of evidence showing that the self-employed have been one of the hardest hit groups in the economic fallout caused by coronavirus. Since lockdown, IPSE has been proactive in gathering data on how the crisis is impacting self-employed workers. Our first Coronavirus Report, latest Confidence Index and our joint research with the University of Edinburgh have all shown the same thing: decreasing work, significantly lower earnings, and business confidence at record lows among freelancers.
Data from the ONS has found sixty per cent of self-employed people saw their income fall between April 3 and April 30, compared with 22 per cent of employees, and perhaps most concerningly, June’s job figures revealed a fall of 131,000 in the number of self-employed people in the three months to April – a record quarterly fall. This has made it abundantly clear how necessary the government’s Self-Employment Income Support Scheme (SEISS) was, but it has also shown the precarious position of the people who have fallen through the cracks in it.
SEISS has been a lifeline for millions – but many miss out
Our judgement on the SEISS is that it has provided vital financial relief for millions, but its sharp edges have left many without any support. As of 14 June, HM Treasury figures show that 2.6 million SEISS claims have been submitted, worth £7.6 billion. This alone demonstrates how desperately needed the scheme was – that tweaks to Universal Credit or business loans would not have been enough and we were right to campaign for more. Feedback IPSE received from eligible self-employed individuals has also suggested the system has been easy to use and the money has been delivered quickly to people’s bank accounts – and the scheme has been delivering ahead of schedule. The decision to extend it a second time was also clearly welcome.
Nonetheless, we are keenly aware that there are thousands of genuinely self-employed people who have missed out and this is the thrust of our submission. The Enterprise Research Centre estimates around 750,000 sole traders will miss out on the scheme. The Institute for Fiscal Studies (IFS), using a different methodology, has estimated that in total around 2 million people with some self-employment income will not be covered by the SEISS. These figures do not include Limited Company directors, who are also not eligible for the scheme; we estimate this group includes around 715,000 people.
Policy recommendations to unwind SEISS and support excluded groups
Lastly, as we emerge from lockdown the focus should now be on how we can ‘unwind’ SEISS in a fair and proportionate way while also finding ways to support those who have yet to receive any help at all. IPSE lays out six recommendations at the end of our submission.
These include suggestions for how to help those who miss out on SEISS due to its eligibility criteria (the £50,000 cap; the requirement for more than half of income to come from self-employment, and the need for an 18/19 tax return that excludes the newly self-employed), as well as a call for dividend income to be included in government support so that limited company directors can get much-needed help. They also include a ‘flexible extension’ approach to the SEISS in future to avoid support being withdrawn sharply at the end of August, as well as a review of the tax system to deal with longstanding confusion over the status of the self-employed.
It will be up to the government to respond to the committee’s recommendations following its inquiry. Together, we think these policy suggestions offer a sensible starting point for how the government can begin the challenging process of winding down SEISS as the economy reopens, whilst at the same time recognising particular groups need a bit more help. We hope the Treasury will be listening.
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