By David Collings and Sharon Collard
Personal Finance Research Centre, University of Bristol
The speed and success of the UK’s vaccination rollout programme offers some hope of an improved economic outlook. But the short-term picture for employees and the self-employed remains mixed, with up to 3.8 million people in the UK excluded from financial support.
On the upside, it is reported that 56% of firms planned to hire during the first quarter of 2021, while the OBR predicts that unemployment will rise by 500,000 to 6.5% by the end of the year (which is lower than previously estimated). The Chancellor has announced a rise in the National Living Wage, as well as an extension to furlough and self-employment support through to the end of September.
However, since the pandemic began significant gaps in financial support have arisen. Our analysis of Standard Life Foundation’s Coronavirus Financial Impact Tracker shows that up to 3.8 million people who have lost income have been unable to benefit from either the Coronavirus Job Retention Scheme (CJRS) or the Self-Employment Income Support Scheme (SEISS) – a group known as ‘the excluded’. There are two broad reasons why some financially-impacted working people have remained ineligible for support:
- Exclusion for practical reasons, such as the difficulty of administering schemes, or tax system/data constraints. For example, the newly self-employed were originally excluded because HMRC did not hold complete 2019/20 tax return data for this group.
- Exclusion for ‘policy reasons’, where groups were deemed to fall outside of a scheme’s stated objectives. For example, self-employment support was initially designed to target those “most in need”, which underpinned the decision to cap SEISS eligibility at £50,000 of annual trading profits.
How did the March 2021 Budget help the excluded?
There was good news for many of the newly self-employed: SEISS eligibility has been extended to include 2019/20 tax return data, which means that up to 600,000 more people will be eligible for a grant. But beyond this, there was little in the Budget to extend direct financial support to the excluded, because these limited extensions fail to help those with more complex patterns of employment.
For example, the self-employed who have less than half of their earnings from self-employment – including many freelancers and gig economy workers – will continue to be excluded. This exclusion arose because the Government was keen “to make sure only the genuinely self-employed [would] benefit”. But this fails to take into account the lived reality of the labour market for people who are piecing together an income from different sources, including having earned some of their income during the year as an employee and some from self-employment. There are no practical constraints preventing this adversely affected group from being supported, and the cost of doing so would be relatively minimal. Similarly, no tapered support was offered to the self-employed with previous profits of £50,000 – a hard cut-off that has led to some stark inequalities both between CJRS and SEISS and within the SEISS.
The All-Party Parliamentary Group on Gaps in Support has proposed a targeted support grant support scheme package, including greater support for limited company directors, and other groups not covered by the CJRS or SEISS. Northern Ireland has already rolled out a Limited Company Director’s Support Scheme, which suggests there is scope for similar schemes in England and the other devolved administrations. However, the Budget did not take forward any of these proposals. The longer people continue to be financially impacted by the crisis, the harder these exclusions are to justify.