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UK government set to hand lifeline to 'one in three' self-employed workers

Tom Belger
Finance and policy reporter
Britain's chancellor Rishi Sunak is expected to hand the self-employed in the UK a lifeline. (Frank Augstein/AP)

The UK chancellor is expected to hand self-employed workers a lifeline on Thursday, with many facing a collapse in income as the coronavirus has battered the economy.

The government has been under enormous pressure to support the self-employed, including from business lobby groups, opposition parties and Conservative backbenchers.

Many freelance workers from painter-decorators to musicians to lawyers face a long spell without work as Covid-19 and the government’s response have taken a heavy toll.

Almost half a million people have applied for the universal credit benefit in the past 10 days, with hundreds of thousands thought to have been laid off in the hospitality sector. Nearly a million self-employed workers are in sectors where demand has plummeted or trading has ceased altogether, according to the Institute for Fiscal Studies (IFS).

Chancellor Rishi Sunak has already announced an unprecedented scheme for employees who would otherwise be laid off, but nothing similar has yet been confirmed for the self-employed.

Read more: Overwhelmed hardship fund forced to turn away hospitality workers

Taxpayer help will soon be available for employers to fund up to 80% of the wages of staff otherwise at risk of redundancy. But the Treasury has been working frantically to draw up new measures to also support those who work for themselves.

Prime minister Boris Johnson has now promised a “comprehensive” scheme with “parity of support” for the self-employed, with details likely to be unveiled at a daily government coronavirus briefing on Thursday afternoon.

Reports vary about how many workers will benefit and what form the measures could take, however. One source close to talks within government told the Financial Times the package would be “pretty damned universal,” which would appear to suggest a significant proportion of Britain’s 5 million self-employed workers may be eligible.

But the Resolution Foundation think tank expects only around one in three, 1.7 million, will stand to benefit, for now at least.

The level of support likely to be available is not yet clear. Full “parity,” which some MPs expect, would see workers receive 80% of their previous incomes, up to a limit of £2,500 ($2,969) a month as under the scheme for employees.

But the Treasury is thought to be wary about the mounting costs of its support package, large handouts to high earners, issues identifying who needs help and bogus self-employment.

“The challenge is designing something that gets to the people who we want to help, while at the same time being affordable and not having to benefit absolutely everybody. That is proving to be problematic but we are hard at work on it,” said Sunak earlier this week.

Read more: Warnings of ‘income crisis’ for freelance workers as coronavirus toll grows

There are some reports only those on low and average incomes will receive help. A cap could be set at around £1,700 a month or based on median average UK incomes, but the Times suggests the cap could be well above average earnings at around £50,000.

Setting up a new scheme from scratch and reviewing workers’ applications could also take more time than the employee wage scheme, where HMRC can make calculations through existing systems and data from its pay-as-you-earn system (PAYE).

The universal credit benefit has already been tweaked to help more self-employed claim to replace or top up reduced incomes. But business leaders and think tanks say it is nowhere near generous enough, and may struggle to deal with the new caseload.

Adam Marshall, director general of the British Chambers of Commerce, told the BBC on Thursday: "For many people that have seen their businesses disappear in the blink of an eye, things like statutory sick pay or universal credit just isn't enough.

"It doesn't need to be perfect – we just need a system in place.”

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