ALEX BRUMMER: Why Rishi Sunak struggled with a rescue plan for the 5 million self-employed in Britain
The demands of the UK’s 5 million self-employed and freelancers for parallel benefits to Paye’s are unwavering and a useful tool to attack the government.
In many ways, since the financial crisis of 12 years ago, this cohort has been a foundation of Britain’s economic revival, with citizens using surplus money to start up businesses, entering the fast-growing creative sector – from gaming to design. and bring food and services to our doors as part of the gig economy.
It would be cruel to send them to the wall. But it would be a mistake to think that this is a coherent group and that some sort of magic wand could be moved that would save them.
Chancellor Rishi Sunak acknowledges that there is a plea for caring for the self-employed and a way through the existing social security system
Their earnings data are patchy and largely based on tax returns for the financial year 2017-18, suggesting an average income of around £ 22,000 a year, which is well below the full-time average wage of £ 30,420.
However, the equation is not like-with-like.
Self-employed individuals can charge a variety of costs as small businesses, ranging from transportation costs to utility bills and other services against their income – a facility not available to most Paye employees.
In some cases, there are unrecognized cash transactions, which completely bypass the tax system. Nevertheless, Chancellor Rishi Sunak acknowledges that there is a reason to care for this group.
One way is through the existing social security system. In his major economic statement last week, Sunak did provide an additional payment of £ 1,000 to those on helicopter allowance for the less fortunate who were absorbed by Covid-19’s economic downturn.
The big question facing Sunak and HM Treasury is how far they must go to save this group.
The pressure from opposition banks and sections of the media is for a complete rescue under similar circumstances to Paye’s employees.
That would mean that 80 percent of their income would have to be guaranteed, if it could be accurately assessed, which would mean looking at tax returns in three years’ time – quite an administrative task.
The concern is that if the crisis spanned many months, the ultimate cost could be as much as £ 30 billion to £ 40 billion, even if payouts were limited as they are for Paye employees.
In the two major announcements since the budget on March 11, the government believes it has already begun to widen fiscal policy. However, this does not mean that Sunak will not do anything.
He looks at a range of options, such as guaranteeing an income of up to 50 percent or 60 percent of the reported income.
Many self-employed persons will find that the social security system with additional benefits – such as rent allowance – is suitable for the intended purpose.
Self-employed people are a diverse group, ranging from rock stars – who earn millions of pounds annually – to the person on their scooter delivering our pizza.
Bridging the gap and caring for those trapped in the middle – with one simple rule – will not prove to be easy and someone is unlikely to be satisfied.