Coronavirus: Third-time unlucky, Chancellor
Image credit: gov.uk
Rishi Sunak's latest moves for the self-employed still leave too many gaps that are not merely inequitable but dangerous.
These are troubling times. As the estimable Mark Strong tells us, “Stay at Home, Protect the NHS, Save Lives.” But to do that, we really should all be in it together. Sadly, we’re not. Not yet, at any rate.
Chancellor Rishi Sunak’s latest emergency worker proposals on Thursday, (27 March) went a very long way towards delivering measures that will protect livelihoods, now also for most of the self-employed. But after the Budget and his intervention about week earlier, it still couldn’t be called third-time lucky. Today, tens of thousands – maybe hundreds of thousands – of UK workers still feel that the government has become almost as big a threat as Covid-19.
The exclusion of those who became self-employed after the end of the previous tax year is going to have a serious impact on people across many trades and professions. These include, for our specific purposes, IT and engineering consultants along with entrepreneurs in early-stage start-ups. The IR35 oversight is a running sore here too, particularly in technology.
It needs saying that there will be builders, plumbers, taxi drivers, hairdressers and others in the same boat, all of whom tend to earn less than technology workers and have smaller savings. Yet not all in our own sector are rolling in it, and there is the reality that outgoings are relative to income. Seeing your income slashed to around a hundred quid a week in Universal Credit is, let’s be honest, brutal. Offensive, when you see others receive far better treatment.
Moreover, with the Chancellor hinting heavily that he is going to put self-employed National Insurance contributions on a parity with those of full-time staff, this group senses it is going to be asked to pay in future for benefits from which it has been actively excluded. Missing the political and social toxicity of that was a huge mistake.
But even coming to those self-employed workers who are covered - those on profits below £50,000 – there are deep flaws. They will have to wait until June before receiving their grants, but many are in a cash-flow crisis now and the government systems that could provide bridging payments are already being stressed to capacity (making it ironically likely that they will crash and then depend on many of those aggrieved independent consultants now being forced to wait in lines hundreds of thousands of people long).
We cannot let the perfect be the enemy of the good – and the Chancellor has done a lot of good. Sunak is also right to say that it is pretty much impossible to deliver a universally equitable income support scheme. But, frankly, what has been delivered has obvious shortcomings that can and must be fixed.
Before we go into some solutions, we need to look at why the Chancellor continues to stumble, in spite of his slick presentational skills. There are those who will just instinctively blame ‘those Tory b******s’. A period of silence on their part would be welcome generally. They’re not helping and, anyway, the measures that the Chancellor has announced do not so much embrace as greatly extend Keynesian economics.
Rather, the problem is largely systemic.
In this clip from Newsnight (March 26), the BBC’s Political Editor Nicholas Watt referred to a pandemic exercise conducted by the government in 2016. Although it was for flu where anti-virals would be available, it still identified major problems that the system is already facing for real or beginning to: attrition of NHS staff, moral dilemmas over the allocation of intensive care beds, and capacity at crematoria and mortuaries. Then Watt added this:
“Interestingly, I would be pretty sure that the Treasury would be very heavily involved in that exercise. But my person who was involved didn’t mention anything about economic preparation which may give you some indication why it took Rishi Sunak so long to make this announcement on the self-employed today. It looks like he might have been starting from scratch.” (My italics)
That is remarkable in itself, but what is additionally making Sunak struggle is evidence of resulting groupthink.
Let’s go back to that key message: “Stay at Home, Protect the NHS, Save Lives.” It makes it clear that this is primarily a healthcare crisis to which, here, some form of economic assistance is being applied.
Yes, one goal is to secure jobs and family finances to see people through and in the hope that the country can achieve a V-shaped recovery once the outbreak passes. But right now, the absolute priority is to reduce human contact and thereby bring the infection rate – R0 – to below one, the point at which it which the pandemic will start to abate. Some further restrictions will almost certainly be needed beyond that point.
One consistent problem with the Treasury’s measures to date however is that they have focused on economic concerns while keeping something of an eye on spending constraints. That’s what finance ministries normally do.
However, as quickly became apparent when the support package first excluded the self-employed, concerns were voiced not simply about a lack of fairness but something more immediate - that the glaring gap in Sunak’s strategy might lead some workers who should be self-isolating to feel obliged to go out to jobs and spread the infection. And remember, many self-employed workers carry out vital infrastructure roles from transport to construction to IT, communications and engineering. They felt beggared and excluded from the government’s ‘We’re all in it together’ mantra.
The updated package goes a long way towards addressing this. But given that the UK is on the escalating ramp of this wave of the outbreak (with even the Prime Minister and Health Secretary testing positive) and the NHS under increasing pressure, the delays and exceptions do not resolve it. Only a full acknowledgement of the systemic link between healthcare and the economy can do that. Days lost are lives lost.
A whole-of-government strategy is needed, but badly lacking. How can this be resolved?
First, ways of getting appropriate funds into all workers bank accounts must be fast-tracked. Self-employed workers’ bookings have already dried up. Here, engineering could help. The government could make a call for extra resources to help it scale and protect its systems – both within the payments infrastructure and, arguably more important, the NHS (it struggles with a lot of legacy IT, for starters).
Second, rather than bundling three months of money into one lump sum in June, advances should be made available up to a fixed and appropriate percentage of the individual’s estimated final grant. Ideally, at least 33 per cent.
Third, a substantial proportion of those who entered self-employment before the last tax year are likely to have been staff employees beforehand. They should be offered at least 80 per cent of what they earned in their last one-to-three years in those full-time jobs (comparable to the profits metric being used for longer-term self-employed). The government does have those records.
Fourth, those who were not in staff jobs before moving to self-employment will represent a comparatively small number, but there are specific groups for whom bespoke packages could quickly be tailored (e.g. parents or those who have recovered from long-term illness returning to work).
Fifth, the Treasury would then commit, having these measures in place, to moving on to address any gaps that remain, rather than closing out its proposals.
And sixth, the Treasury would damn well sort out IR35. Many of those on this scheme in technology were effectively forced on to it by large companies and/or prompted to do so by HMRC itself. Parity with other workers here is essential.
This is not perfect. It could probably be tailored and added to. It may have flaws. What do you think? The reality though is that it would start to take us further forward. It restores a large part of the social contract so that everyone (or nearly everyone) can feel confident about being able to follow the healthcare advice, keep up to date with bills and put food on the table. The self-employed will feel we really are all in it together and that they are not actively being left behind.
Policy must save not just livelihoods, but lives. Come on, Chancellor, you can do this.
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