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Why we still need more support for the self-employed

Kate Dearden
25th April 2020

It’s almost a month since the Chancellor announced a support package that will help millions of self-employed workers in response to Covid-19. Many will have felt reassured that their incomes would be protected during many months of uncertainty. However, for the millions of self-employed workers who fell through the gaps of the government’s support package, their lack of work and income have pushed them into financial hardship and difficulty.

The self-employed income support scheme was a welcome safety net for those who saw their work and incomes dry up due to the pandemic. Covering 80% of their trading profits, up to a maximum of £2,500 per month, taken from up to three years of tax assessment records will help thousands of workers get by. The big caveat is that cash won’t get to the pockets of those who need it until June. In the meantime, those who are self-employed can turn to Universal Credit, and potentially wait five weeks for a payment. If they aren’t eligible for Universal Credit, they can look at taking out a loan, or a grant to cover salaries, stock, suppliers and bills for their business.

For those not eligible for the scheme – such as those who are recently self-employed, those who run as limited companies and those who make a profit of over £50k – there is no June payment to plan around and rely on. These workers have nothing more than Universal Credit or hard to come by loans to keep them going for however long the lockdown lasts.

It is simply not fair that if you started up a business as solely self-employed in January 2020 you will not receive a penny to help towards your loss of income. Neither is it fair that self-employed workers who run as limited companies and pay themselves through dividends will be penalised throughout this crisis. Those whose small businesses earn just over £50,000 profit, regardless of their often large expenses, are also all but abandoned by this scheme. Finally, even those – primarily women – workers who have taken parental leave during the past three years are at risk of receiving less support.

The poverty charity Turn 2 Us saw a 1,800% increase in the use of their benefits calculator last month. Nearly one million people applied for Universal Credit between March 16th and 31st, rather than the normal 100,000. Thousands of those are low paid self-employed workers who are not eligible for the income support scheme. We have seen some welcome changes to Universal Credit – from the minimum income floor to not counting savings to pay tax as part of the £16,000 savings cap. But £92.25 is still not enough to provide for your family, pay your bills and keep your business ticking over.

The majority of the self-employed just want to be treated equally and be given the same support that is being rightly provided to employees. On the first day the job retention scheme launched, 1.3 million were employees reported as furloughed so far. That means vast numbers of jobs and livelihoods protected, and it is a profound and welcome achievement. We need to be sure we can match those achievements for the self-employed.

There are five million self-employed and freelance workers in the UK, and this is growing every year. This way of working often gives these workers flexibility and freedom over their work, enables them to better manage health conditions by deciding when and how they work, and can be more rewarding than traditional employment. That’s why more and more people across the UK economy are choosing this way of working, and why we need to get support for this vital part of the economy right. If we don’t, we risk hurting millions of people in one of the growing areas of our economy.

It’s been encouraging to see the self-employed organising amongst themselves and supporting one another on dozens of Facebook groups and support pages during the pandemic. Even more encouraging is that they are also turning to trade unions, seeing the benefits of becoming part of a collective voice and ensuring their voices are no longer forgotten.

There’s lots to do to ensure all self-employed and freelance workers get the support they need to get through the uncertain and stressful months ahead, and we need the government to show it wants to get this right. At Community trade union, we’ll continue to be lobbying for the government to plug the gaps in the support scheme, and along with sister unions across the movement look to offer solutions and feedback on how we get there. Waiting for over another month is too long a wait for income support, but waiting indefinitely is unforgivable.

Kate Dearden is head of research, policy and external relations at Community union. She tweets at @Kate_Dearden.