Holes in the self-employed support scheme are swallowing millions of people alive

Photo credit: Zimmerman on Unsplash

When the government announced the furlough scheme for workers hit by the coronavirus lockdown, they initially forgot about the estimated five million self-employed people in the UK. After campaigning from several MPs and lobbying groups, they did announce a scheme for the self-employed, the Self-Employment Income Support Scheme (SEISS), on 26 March. This caused temporary relief for many people who thought that they would be supported after all. However, as the scheme details emerged, it became clearer that many people simply fell through the cracks and wouldn’t be protected after all.

The scheme announced support by providing grants of up to 80 per cent of average monthly profits, calculated as an average across the last three years, up to a maximum of £2,500 a month. Self-employed people were only eligible for the scheme if:

  • At least half of their income came from self-employment as registered in the 2018-19 tax return
  • They earned less than £50,000 a year

Unlike those eligible for the furlough scheme, those receiving grants from the SEISS could continue to work. The money was backdated to March, although it was not received by those in need until June, meaning several difficult and stressful months for those in need. The grants are taxable, and must be declared on tax returns.

For those covered by the SEISS, it was a much-needed lifeline. The problem is that an estimated two million people were simply forgotten and left with no support at all.

The Forgotten People

If a couple are both employed by a company, they could both be furloughed and receive 80 per  cent of their salaries. If a couple are both self-employed and each earn £49,500, they would each be eligible for support. But if one person, who could be the only earner in their household, potentially providing for an entire family, earns £50,000 from self-employment, they get nothing. Doesn’t that seem extremely unfair? And that’s just the start.

Women who have had any maternity leave in the last three years, or anyone who has taken time away from work due to caring responsibilities, will see their support drastically reduced or disappear. Directors of limited companies qualify for little or no support, as they normally receive the majority of their income through dividends, and these are not included as income for SEISS calculations. Anyone who has a mixture of PAYE and self-employed income may be eligible for little or no support, and the list goes on.

We asked for stories on social media, and were overwhelmed by the painful and anxious circumstances now faced by those who have been forgotten.

A freelance video editor told us he has been self-employed for three years. He set up a limited company, as otherwise the agencies he needed to work with would not be willing to enter into a contract with him. He pays himself the minimum salary, and dividends when he can. As dividends would not be counted towards his earnings for the purposes of the SEISS, he had two choices: he could furlough himself, receiving just £580 a month, and not work, or he could carry on trying to find work in an incredibly difficult economic climate and receive no government support at all. This is a familiar story, which resulted in two campaign groups being established – Forgotten Ltd and Excluded UK.

One sole trader told us that she had spent the last year building up her freelance income whilst taking on part-time employed work to cover her bills. In August 2019, she was making enough money from freelancing to leave employment and concentrate on freelance work full-time. As her income from employment was higher than her income from self-employment in those early stages, and the government is refusing to take into account 2019/2020 tax returns when calculating SEISS support, she is eligible for absolutely nothing. Many people told us about being caught in this gap where they had not been employed for some time, and therefore could not access any support that way, and yet had not been self-employed for long enough to qualify for the SEISS. To qualify for government support, you would need to have been fully self-employed for at least eighteen months to two years. Anyone who became self-employed more recently has simply been abandoned.

Several mothers contacted us to talk about the blatant sexism inherent in the government’s scheme. One woman told us that, as she had a three-year-old, her last three years’ earnings had inevitably been lower than normal. This was a reduction that she had anticipated and planned for. However, as her child is now older and eligible for childcare allowance, she has recently been able to return to her full earning power. But as the government is only looking at the previous three years, not the most recent year and people’s current situations, the support she can claim under the SEISS is equivalent to just two months of recent earnings. The rules directly penalise her for having had a child. 

The Fight for Justice

As well as the campaigns by Forgotten Ltd and Excluded UK, MPs like Tracy Brabin and Caroline Lucas campaigned endlessly for support for those who had been ignored by the government’s plans. Organisations such as Pregnant Then Screwed have also sought to highlight how many mothers have been penalised and let down by the scheme.

The government, however, does not seem to have been listening. Time and time again they have rejected calls for more support or different approaches to address the gaps and help those who have been left out. Despite initially promising that they would “do whatever it takes” to protect individuals and businesses from financial hardship as a result of the pandemic, the Chancellor now insists that they have done enough and that they are more concerned with minimising potential fraud than with helping those who remain in need.

This afternoon Caroline Lucas led a parliamentary debate that she secured on the gaps in the SEISS and what more could be done. In her opening speech she passionately outlined the plight of those left out of support, saying “the government has failed to recognise the reality of what self-employment looks like in Britain today” and went on to describe the ways that self-employed people have been left out. She called for action, saying that the government is refusing to meet to discuss the issue and that “the first step would be for the government to acknowledge there’s a problem instead of sticking their fingers in their ears”. Many MPs echoed Caroline Lucas’s comments about the self-employed when she said “our innovators, our risk-takers, our entrepreneurs are being punished”.

The debate was striking in that it secured support from all corners of the house, with passionate speeches from MPs from across the United Kingdom and from all parties. Most of them had stories about their constituents, the people the government has forgotten. MPs pointed out that the self-employed are the innovators and the risk-takers who will stimulate the growth we need. The debate ended with Kemi Badenoch, Exchequer Secretary, pretty much ignoring the pleas from across the house to meet to discuss this issue. Caroline Lucas ended by saying, “All of us want to see some changes in this scheme”, that there is “no shame in admitting there have been mistakes” and asking again for a meeting to discuss the matter.

Photo courtesy of Caroline Lucas MP

Caroline Lucas MP told Sussex Bylines:

The Chancellor has had months to repair the cracks in the Government’s financial support schemes, and he’s done nothing about it. Worse, he doesn’t even seem to understand that huge numbers of people with very modest incomes are being excluded and seems to believe they are all high earners with incomes over £50,000. 

Ministers have refused to even meet with some of the people affected. Hard-working, tax-paying, self-employed people are simply being ignored. There is no justification for this. 

Many of the unsupported millions are financially desperate. They’ve seen their small businesses and livelihoods go to the wall, many are now laden with debt, with huge impacts on their mental health. 

These are people who are the backbone of our economy and our local communities – hairdressers, caterers, plumbers, gardeners, freelancers who are struggling to make ends meet. They come from every constituency in the UK – which helps explain why 260 MPs including 79 Conservatives joined the all party parliament group to support them. 

The Government promised to do “whatever it takes” to get us through the coronavirus crisis. It’s time to deliver on that for the excluded self-employed and give them the support they should have had from the start.

An uncertain future

So what next for those abandoned by the government? As restrictions tighten across the country once again and we brace ourselves for a potential second lockdown, and a predicted winter spike in coronavirus cases, many self-employed people are highly anxious about the future.

Self-employment may be painted as a luxurious life of jet-setting entrepreneurs working from sunny beaches, but the reality is quite different. Most self-employed people are in low-income service jobs, such as gardening, hairdressing, beauty therapy and manual labour. A huge number of people become self-employed not through choice, but through necessity – responsibility for children or other family members means that they cannot work the strict regular hours required by employers, and a number of people, particularly women, find themselves forced out of the workplace due to toxic environments. Many set out to work for themselves because there simply weren’t enough employed jobs available in their industry. With the coronavirus pandemic decimating our economy, it’s likely that many more may have to follow their example.

Yet those who do find themselves with no other option but self-employment should not expect any help from their government – our elected leaders seem utterly to have forgotten they exist.

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