There are fresh calls for the Government to ‘fix the unfair disparity’ between self-employed workers and employees as the whole of England prepares to enter a second lockdown.
IPSE (the Association of Independent Professionals and the Self-Employed) has responded to the announcement of the second national lockdown by warning that unless government expands support to include all self-employed people, thousands will face “financial calamity” under the new restrictions.
There has also been further concerns surrounding the planned cut in Universal Credit support payments which are relied on by thousands of struggling self-employed workers.
Derek Cribb, CEO of IPSE, said: “Government must urgently fix the unfair disparity between employee and self-employed support. Right now, the self-employed can claim just 40 per cent of their earnings compared to 80 per cent for employees through the extended furlough scheme. This cannot stand as we enter a second national lockdown.
“Crucially, government must also make sure it extends the Self-Employed Income Support Scheme to all self-employed people. The gaps in support in the first lockdown – such as limited company directors and the newly self-employed – led to the biggest drop in self-employed numbers on record. Many thousands lost their freelance businesses and were driven onto Universal Credit.
“Now, those limited company directors and other excluded self-employed who made it through on their savings face financial calamity if they do not get support in this second lockdown. Government must urgently increase the amount paid through SEISS and extend it so that all of the UK’s 4.6 million self-employed are supported.”
The Trades Union Congress (TUC) and Federation of Small Businesses (FSB) have also come together to urge the Government to halt a planned cut in Universal Credit support payments.
The Department for Work and Pensions (DWP) is on course to reinstate from Friday 13 November what has been described as a ‘flawed formula’ which overstates the income of many low-earners in self-employment, and cuts their Universal Credit payments.
The formula, known as the ‘Minimum Income Floor’, assumes claimants are earning the equivalent of the National Minimum Wage or National Living Wage. In reality, many striving entrepreneurs are earning significantly less, particularly in sectors where the COVID-19 pandemic has hit the hardest.
TUC and FSB have written a joint letter to the Secretary of State for Work and Pensions, Thérèse Coffey MP, raising “serious concerns” over the benefit cut for those seeking to earn a living by starting and growing their own business.
The Government suspended the Minimum Income Floor in March as the first wave of COVID-19 hit, recognising the loss of income and hardship many self-employed were facing. However, it is set to be re-imposed just at the moment the second wave is bearing down on the economy.
The Institute for Fiscal Studies (IFS) has estimated that around 450,000 self-employed workers are negatively impacted by the Minimum Income Floor, losing an average of £3,200 a year each.
FSB National Chairman Mike Cherry said: “Universal Credit was never designed around the self-employed, who often feel like square pegs forced into round holes.
“Suspending the Minimum Income Floor for COVID has therefore been both welcome and crucial. As the second wave of this crisis hits, and further decimates income, the removal of the suspension assumes that the self-employed are not affected by restrictions and that their earnings aren’t affected if they need to self-isolate or fall ill. This would hit livelihoods, and create poverty and hardship.
“The reintroduction of this flawed formula will turn Friday 13 November into a real-life nightmare for hundreds of thousands of talented but struggling entrepreneurs doing their best to get through this crisis so they can play their part in rebuilding the UK economy out the other side.”
TUC General Secretary Frances O’Grady said: “Self-employed workers have been particularly hard hit by the pandemic. With restrictions stepping up again, it’s a disastrous time to cut this lifeline.
“It will mean a surge in unemployment and severe damage to sectors like live events and creative industries. The economic damage is bad enough, but it would tragic for Britain’s cultural life too.
“The families of self-employed workers will be desperately worried. They urgently need reassurance from the Chancellor that this support will be extended.”