Chancellor Rishi Sunak has announced a multibillion package of support for up to 3.8 million self-employed people suffering a financial hit from coronavirus – but told them they will have to wait until June to get it.
The announcement of a taxable grant worth 80 per cent of average profits, up to a maximum of £2,500 a month, was greeted with relief by business organisations, who said builders and other workers had until now been forced to ignore advice to stay at home if possible in order to put food on the table.
But others warned the June date for the payment of three month’s backdated support would come too late for many self-employed and freelance workers who are already feeling the pinch.
And the chancellor also sparked concerns by hinting that preferential tax arrangements for the self-employed may be withdrawn in a future budget in return for the help being offered now.
John McDonnell, the shadow chancellor, said: “My worry is that if people cannot get access to the scheme until June it will simply be too late for millions. People need support in the coming days and fortnight.”
Unveiling the plans at the daily Downing Street press conference, Mr Sunak reassured self-employed workers such as hairdressers, childminders and cleaners concerned about losing their livelihoods: “You have not been forgotten.”
The new scheme, which Mr Sunak described as “one of the most generous in the world”, is expected to pay out an average of £940 per person and will initially run for three months at a cost estimated by the Treasury at around £3bn a month.
Some 200,000 self-employed people reporting profits above £50,000 a year will not be eligible, along with 1.7 million who earn less than half of their income from self-employment and an unknown number who have been trading for less than a year and have therefore not submitted tax returns for the years 2018-19 and before on which their entitlement could be calculated.
Mr Sunak said payments would be made only to businesses which have been “adversely affected” by coronavirus, with HM Revenue and Customs contacting businesses directly if they are eligible.
He said that those facing immediate financial difficulties can also access business interruption loans and may benefit from the deferral of VAT and income tax payments and the business rates holiday.
“Self-employed people are a crucial part of the UK’s workforce who’ve understandably been looking for reassurance and support during this national emergency,” said Mr Sunak.
“The package for the self-employed I’ve outlined today is one of the most generous in the world that has been announced so far. It targets support to those who need help most, offering the self-employed the same level of support as those in work.
“Together with support packages for businesses and for workers, I am confident we now have the measures in place to ensure we can get through this emergency together.”
In an apparent signal to future moves to equalise the tax treatment of employed and self-employed people, he added: “I must be honest and point out that in devising this scheme in response to many calls for support, it is now much harder to justify the inconsistent contributions between people of different employment statuses.
“If we all want to benefit equally from state support, we must all pay in equally in future.”
The package was widely welcomed by the Confederation of British Industry (CBI) for providing “essential support to those facing significant uncertainty and loss of income”, while the British Chambers of Commerce said it offered “a lifeline to the vast majority of the UK’s 5 million self-employed people, many of whom have seen their livelihoods vanish overnight”.
The chairman of the Federation of Master Builders, Brian Berry, said construction workers across the country would be “taking a collective sigh of relief” and said building companies will now “be able to close sites to protect workers and public health without having to worry about the losses faced by self-employed workers on those sites”.
But Matt Dowling, CEO of the Freelancer Club, said: “The key question is why did this support take so long? I’ve spoken to thousands of freelancers over the last week and the collective despair has been palpable. Some have already had to make heartbreaking decisions to stay afloat.
“Waiting for this announcement has set freelancers apart from the rest of the country and moved them closer to the precipice by a whole week. Not having the system up and running until June could prove critical.”
Mr McDonnell voiced relief, but questioned how the self-employed will get by while they wait for their grants: “Asking people to rely on universal credit when more than 130,000 people are queueing online will be worrying to many people, so there is a real risk that without support until June the self-employed will feel they have to keep working, putting their own and others’ health at risk.”
Liberal Democrat acting leader Ed Davey said: “I am hugely concerned about how long this will take to deliver.
“Many sole traders like taxi drivers, hairdressers and cleaners will not be able to wait until June. I also worry about people who have been self-employed for less than a year who seem to be forgotten by this scheme. Many will have risked their savings to get started and it looks like they will get nothing from the package.”
TUC general secretary Frances O’Grady said it was a “welcome step”, but added: “It’s vital that support reaches workers as soon as possible. Many are already dealing with severe hardship.”
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