Taxi drivers, hairdressers, cleaners, builders, tutors, musicians – these are the self-employed today. They make up the five million self-employed in the UK who are crucial to our economy and our society. Yet today we are still waiting for ministers to announce a proper package of support for them during the coronavirus crisis.
Treasury ministers say the help is coming, but that it’s just so complicated. However, I think the government is making it over-complicated – because ultimately there’s an institutional distrust of the self-employed in the Treasury and Her Majesty’s Revenue and Customs. When they hear “self-employed”, they hear high-flying entrepreneurs, TV presenters, consultants. And they hear tax avoidance. In doing so they lose sight of the fact that millions of people on modest incomes are facing a financial crisis.
So in parliament this week, I tried to get over to ministers the reality of self-employment. Nearly four million of the self-employed are sole traders. These people don’t operate out of the personal service companies the taxman is chasing. They aren’t incorporated businesses, umbrella firms or exotic offshore tax shelters.
These sole traders often earn less than the average employee. According to HMRC’s own figures, 36 per cent of sole traders take home less than £10,000 a year – compared with 15 per cent of employees. Many were struggling before coronavirus – but now the demand for taxis, haircuts, piano lessons and odd jobs has dried up, they are facing financial ruin.
Whole sectors are being hit, such as the creative industries. All the places that make our culture so vibrant in ordinary times – cinema, theatres and music venues – are largely powered by self-employed workers. They have lost their jobs overnight with the lockdown measures that have regrettably proved so necessary.
That’s why the government must consider both the impact on our society, as well as our economy. People’s livelihoods are vanishing overnight – with devastating consequences. I’m sure there are super-talented, highly intelligent people burning the midnight oil in the Treasury to come up with schemes – but I’m not sure they are being pragmatic.
In an understandable desire not to give money to people who don’t need it, they are in danger of depriving support from people who are desperate. If the self-employed scheme copies the scheme for employees, it would at least be capped and temporary – so minimising the amounts that might be given out unnecessarily.
And the Treasury could go one step further in a scheme for the self-employed. Ministers could justifiably say that if people apply for support and it turns out they didn’t need it, that support would have to be repaid in the future, via the annual tax returns the self-employed all complete. Ministers could also make clear that there would be penalties in cases of deliberate abuse.
Other governments, including Denmark’s and Norway’s, have acted fast. And acted generously. In both the Commons and the Lords this week, the Liberal Democrats used these Scandinavian examples to put forward proposals to guarantee self-employed individuals’ incomes, similar to what the government has put in place for employees.
There’s a real danger the government is letting the perfect be the enemy of the good – and causing untold distress in groups of people who struggle in the best of times.
Ed Davey is acting co-leader of the Liberal Democrats
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