The UK’s furlough scheme, which will be extended in full (80% of salary) until the end of March, with the Self-employment Income Support Scheme (SEISS) grant increased to 80% of profits for November to January, up to a maximum of £7,500, is a welcome relief – for those that are eligible.
However, one year of furlough, with 3 million self-employed workers not receiving any support calls to question if they will be included in any form of support in 2021.
“While the Government has extended some measures, it is still failing to fix major gaps in the support,” Jonathan Geldart, Director General of the Institute of Directors, said in response to the Chancellor’s statement in the House of Commons, announcing furlough scheme extension.
Safety nets required says IoD
“Many self-employed, including small company directors, continue to be left out in the cold. Grant funding through local authorities could help address this issue, otherwise, those missing out will face a harsh Winter,” said Geldart.
The IoD Director suggest that the Government should now reinstate and extend insolvency protections to prevent company collapses.
“The Treasury should also work with banks to ensure that loans reach the front line. Finally, the Chancellor should look to marry defensive measures like the furlough with policies to get firms on the front foot, encouraging job creation and investment through the tax system.”
Geldart said it is paramount that businesses aren’t caught in the crossfire of political negotiations over coronavirus support.
“The onus is on all sides to work constructively moving forward,” he said.
Will exclusion bring on extinction of solopreneurs?
Seb Maley, CEO of Contractor Insurer and IR35 specialist, says while the extension of the furlough scheme is “good news for employees”, the reality is the “furlough scheme simply doesn’t work for most one-person companies”, reiterating that those business owners have received very little or no support whatsoever throughout the pandemic.
“These individuals aren’t eligible for the self-employment scheme either, meaning they continue to fall between the cracks,” said Maley.
“Time is running out for the Chancellor to provide the support that millions of freelancers, contractors and small business owners clearly need. The fact that the furlough scheme will run for a year shows just how serious the situation is, which begs the question, why has the Government cast aside limited company directors for so long?
“The longer this virus continues to affect the UK, the more urgent it becomes that the support packages actually work for freelancers and contractors,” he said.
The Institute of Fiscal Studies estimates that 18% of those for whom self-employment makes up at least half their income are ineligible for SEISS, while 38% of those with any self-employment income are ineligible.
Among those who have not claimed SEISS, survey evidence indicates that two-thirds have seen a decline in income, and about a sixth were not working at all – suggesting that the eligibility criteria (as well as perhaps non-claiming by those eligible) screened out many people whose incomes had been affected by the crisis.
The financial eligibility criteria for the next two SEISS payments has not changed, so 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 the IFS.
“For those that are ineligible because they did not file a tax return in 2018-19 – perhaps because they only recently started their business – it is harder to see how the government could reach them to provide support. 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.”