Freelancers are key to getting Britain’s economy moving again – here’s how we've asked the Chancellor to help

Tomorrow Chancellor Rishi Sunak is due to unveil a series of measures to stimulate the economy as the country emerges from lockdown. Not quite a full budget, rumours abound that this could include investment in infrastructure, green jobs and potential changes to stamp duty and VAT. We have also written to the Chancellor, explaining what we believe he should do to support freelancers in the coming months. 

Freelancers across every sector of the UK have had their daily working lives affected during the coronavirus crisis. The Self Employment Income Support Scheme (SEISS) delivered by the government was a welcome boost for sole traders. However limited company directors and the newly self-employed, among others, were left behind.

The UK economy has experienced a recession unlike any other. Triggered by the lockdown, what we experienced in March was unprecedented in speed and scope. No former global downturn is exactly comparable – even though the Second World War shut down international trade and had far-reaching consequences for the economy, you could still leave the house and go to the shops. Freelancers in the creative industries felt this even before the official lockdown as events began to be cancelled in early March. The sector has finally received bespoke financial support from the government in the form of a £1.3bn grant. However, the finance here is targeted at the upkeep of venues, rather than those who work in them, who will still struggle unless production returns to something like full capacity.

Government support thus far has been extensive. The SEISS scheme, furloughing of employees (including some but not many company directors) and several business loan packages have helped maintain the incomes of millions. But the support packages, particularly SEISS, have all had sharp edges and thousands of freelancers have felt side-lined. What businesses, families and individuals need now is assurance that the government will not leave people behind as we enter a new phase in this crisis.

This morning, the Resolution Foundation released a report which reiterated IPSE’s calls for the extension of SEISS. Like us, they suggest the removal of the punitive arbitrary cap of £50,000 on applications and the inclusion of both the newly self-employed and limited company directors in the scheme in future.

What else could be done to get the economy moving again? We believe the flexibility and specialist skills that freelancers and the self-employed offer will be crucial to restarting economic growth.

IPSE’s policy suggestions

Here are four big policy suggestions that we have recommended the Chancellor should implement to help stimulate the economy and protect the self-employed:

1. Make COVID self-employment support flexible and fair as we emerge from lockdown

SEISS has been a vital lifeline for over 2.6 million self-employed people. However, we are concerned that the government intends the scheme to end altogether in August. While we recognise the scheme cannot run in perpetuity, it should be unwound carefully – along the same lines as the Job Retention Scheme – to avoid a cliff-edge of financial support and ensure those in hard-hit sectors, such as the creative industries, get support.

As the economy recovers, the government should also look at tweaking the eligibility criteria to give a boost to those groups – principally company directors and the newly self-employed – excluded the first time round. Flexibility and fairness are vital if the SEISS has to be revived in some form in a second wave, as the Resolution Foundation report suggest.

2. Rule out tax rises on the self-employed – and review the tax system to deal with longstanding confusion over employment status

In his speech announcing the SEISS, the Chancellor suggested that a tax rise on sole traders may be forthcoming as the ‘quid pro quo’ for government support. We believe linking a future tax rise to a temporary injection of support in the midst of a global health and economic crisis is not the right way forward. This approach risks penalising many of the self-employed who did not benefit from SEISS in the first place and stymieing rather than stimulating business activity.

Instead, the government should take pause and seize the opportunity to rethink the tax and employment system in the long term. This would help clear up ongoing confusion and longstanding complexities, notably the IR35 legislation and the intended rollout to the private sector in April 2021, that have led to the current situation where there is a lack of clarity over who is self-employed. The review should look to deliver a fair deal on taxation for the self-employed that recognises the additional risk this group takes on.

3. Fast-track plans to tackle late payment to get businesses to ‘pay up’ on time

The last thing freelancers and small businesses need during the current crisis, when cash flow is their top concern, is to lose time and money chasing late payment. While we recognise the disruption COVID has caused businesses of all shapes and sizes, there is simply no excuse for not paying freelancers and contractors at this time.

Our own research has shown two-thirds of freelancers have experienced late pay and it is regularly cited as one of the biggest issues for self-employed workers. Before the pandemic struck, we published a new report (Pay Up: how to end late payment for the self-employed) on the topic featuring a series of recommendations. Top of our list is for the government to get a move on with the measures it announced over a year ago, and provide the Small Business Commissioner with more resources and powers, including fines and the ability to compel companies to attend mediation.

4. Make sure the self-employed can take part in the training and skills revolution

The pandemic has refocused attention on the issue of training and skills. The need for flexible and remote working places a premium on digital skills, and as part of the recovery, younger people in particular would benefit from a ‘soft landing’ by being able to access apprenticeships or training courses if there are not enough jobs available. The government has even suggested firms will be paid £1000 to hire trainees.

It is vital that the self-employed do not miss out as part of this renewed focus on training and skills. New skills and qualifications are a gateway to higher earnings and career progression for the self-employed, but finding the time and money to undertake training is difficult. The government’s skills and apprenticeships system has traditionally been overly focused on traditional employees and does not account for the training needs of the self-employed. Only 12 per cent of the UK’s solo self-employed have received job-related training in the last three months, compared to 26 per cent of employees.

IPSE has previously called for reform in several ways – we believe the most effective would be to make training for new skills tax-deductible for the self-employed. This would enable freelancers, particularly in sectors where demand has slowed or disappeared, to gain new skills and adapt their business offer to new markets.

Conclusion

IPSE has called for similar measures throughout the crisis, and indeed in some cases before. They provide an opportunity to stimulate the economy, whilst modernising it and preparing the country for a new post-COVID consensus. The Chancellor has endeared himself to the public in a short space of time by decisively rolling out an ambitious programme of support for millions. Now he must consolidate that work by providing a vision for how the economy gets back on its feet. The UK’s self-employed will be vital in achieving that.

Meet the authors

Alasdair Hutchison

Policy Development Manager

Ryan Barnett

Economic policy adviser