26 March 2020

Rishi Sunak’s measures for the self-employed have two time bombs for workers and Tory MPs

The five-week wait to receive Universal Credit will be personally painful for many and may be politically painful for the government too.

By Stephen Bush

LONDON, ENGLAND - MARCH 20: Chancellor of the Exchequer Rishi Sunak speaks during a daily press conference at 10 Downing Street on March 20, 2020 in London, England. During the press conference, British Prime Minister Boris Johnson told pubs, cafes, bars, restaurants and gyms to close, whilst Chancellor Rishi Sunak announced that the government will pay up to 80% of the wages of those unable to work due to the coronavirus (COVID-19) crisis. (Photo by Julian Simmonds - WPA Pool/Getty Images)

Rishi Sunak has unveiled further income protection measures for the self-employed, guaranteeing the annual income of everyone earning the median income in every region on the same terms as those extended to the salaried: but with a couple of important differences, both of which would alarm me if I were a Tory MP.

The first is that that the package doesn’t provide any support for people who became self-employed after April 2019, who are going to be funnelled towards Universal Credit, which many of those who are receiving salary protection (both salaried and self-employed) likely will end up having to claim as a bridging measure.

This makes a lot of sense – there’s no way to work out how much money people need if they have no tax return, and a sufficiently generous welfare system, working well, will more than compensate for that. The problem of course is in the words “sufficiently generous welfare system, working well”. That five-week wait to receive your first Universal Credit payment will be personally painful for many and may be politically painful for the government too.

The collision between Britain’s middle classes and the Universal Credit system in its current form is not going to be particularly pretty and I would be anxious, to put it mildly, were I contemplating it as a Conservative MP with a marginal seat.

The second part is in Sunak’s remarks about the tax regime afterwards – the first time he has hinted at his thinking on how to pay for all this increased spending beyond “interest rates are at record lows and likely to remain so”. He suggested very strongly that the differences between how the self-employed and the employed are taxed will have to be revisited in the future. I think that’s a sensible idea but readers with long memories will remember I thought it was a sensible idea when the last Conservative chancellor with a parliamentary majority tried it – Philip Hammond had to retreat in 2016 and I would be far from certain, even with a Tory majority of 80 seats, that Sunak will not have to do the same.