Rachel Reeves Labour Member of Parliament for Leeds West
COVID-19
Self-Employed People Can’t Wait Until June For Money — Until Then, They Face An Impossible Choice
Millions of self-employed people woke up today to the reality that the financial help they need is still months away.
The measures announced by Chancellor Rishi Sunak are welcome — many of us have been calling for them for weeks — and they will undoubtedly help a great number of the self-employed and freelancers who have seen work dry up due to the coronavirus pandemic.
Under the government’s proposals, a self-employed worker who has suffered a loss of income will be eligible for a taxable grant worth 80% of their average monthly profits up to a cap of £2,500 a month — mirroring the help on offer for traditionally employed workers. The cash will be available for three months and payable in a lump sum.
But it’s not quite as clear cut as that when you look at the small print. The earliest the money will be available under the Coronavirus Self-Employment Income Support Scheme is the start of June. While I recognise that people need to be given time to file their tax returns, for those who already have, I urge the chancellor to get the payments out more quickly.
This critical delay compared to the help available to other workers, who will be able to access financial support from April, will leave many anxiously wondering how they will cope over the coming months. For all the fanfare about claiming Universal Credit, it is much less generous and often only comes after a long wait.
Most worryingly, there is the frightening prospect that some self-employed workers will feel they have no choice but to ignore government advice to stay home and will risk their lives and those of others by going out to work to earn the cash they need.
If self-employed workers feel they are forced to continue working until the support is available, that could add to the overcrowding on public transport that should be kept clear for public health and other key workers.
There are other gaps here that need addressing.
All those who have become self-employed recently, who include some of the most vulnerable, those who have just left college or university and those in precarious jobs, will be excluded from the scheme.
Self-employed workers who qualify will have to have completed a 2019 tax return in a move that effectively bars thousands of self-employed workers. Anyone incorporated as a one or two-person business will not benefit either, whatever their earnings level.
The proposals include a number of arbitrary cliff edges when it comes to who gets support under this scheme, which will cost around £3 billion a month.
To qualify, more than half of a worker’s income must come from self-employment. So, if 49% of a freelancer’s income comes from self-employment, they will be excluded.
Only people turning a profit of less than £50,000 a year are eligible, meaning those earning £50,001 will not be able to claim, affecting thousands of workers who we will need to help rebuild our economy.
Agency workers and those on zero hours contracts also seem to remain between the gaps. People who were sick or on maternity leave during the three years also seem to be an oversight in terms of their average profits being calculated.
The proposals include a number of arbitrary cliff edges when it comes to who gets support under this scheme, which will cost around £3 billion a month.
Bizarrely, the grant will be available whether self-employed workers need it or not. Those whose work has not dried up will be allowed to carry on earning as well as claiming the support. That seems to be a waste of taxpayers’ money when there are so many demands on it, not least from the NHS.
I’m doing all I can to support the self-employed and everyone in my constituency affected by this crisis. And the government has my support for what is an incredibly difficult job tackling coronavirus.
However, it is vital that government urgently addresses the gaps that I have outlined if we are to support as many as possible of the five million self-employed who are such an important part of our economy. There is also a moral duty to ensure help is there by making advances on universal credit available quickly to help people until the scheme kicks in.
Lenders also have a role to play and must ensure loans are on offer at affordable rates to tide over the self-employed and businesses. They benefited from government bailouts in the financial crisis, and they need to stand behind businesses, workers and the self-employed in this one.
We must build the strongest possible safety net, particularly for the most vulnerable, to support people now and to put us in the best possible place to rebuild our economy and return to growth once this crisis is over.
The government must take urgent action to support the self-employed
Now that the government has taken action to lock-down the UK and enforce social distancing measures, it is even more vital that they make sure self-employed and freelance workers who do the right thing and stay home are not left to live on £94.25 per week. Further action must be taken by government to ensure self-employed and freelance workers can pay their bills and keep their businesses solvent.
The measures announced by the Chancellor on Friday were extremely welcome. The government’s income replacement scheme will ensure that millions of workers’ jobs and livelihoods are protected over the coming months. But there are still gaps within the government’s strategy that require urgent redress, and millions more people who remain acutely exposed to the economic impact of necessary measures to contain the spread of coronavirus. If we as a society are to get through this together, we will need equality of sacrifice. As we ask every person and every worker to make sacrifices, so we should expect that every worker enjoys protection against lost work and income.
Around five million people are self-employed in Britain. While employed workers are covered by the new income replacement scheme, there are many who are self-employed, freelance or otherwise precarious who are not. Currently, should they lose work or be unable to work, they only have recourse to Universal Credit at a rate of £94.25. And as they are not covered by the government’s income replacement scheme, they are also in danger of losing income if they cannot work due to the extra burden of childcare commitments now schools and nurseries are closed.
It is arbitrary that the self-employed should see the large part of their income disappear, while other workers enjoy at least some government protection. As the Federation of Small Businesses have argued: “It cannot be right that an employee currently earning £25,000 a year could access £20,000 per annum through the new job retention scheme, while someone who’s self-employed earning the same sum might only access around £5,000 worth of support.” Norway, Germany, Italy, France and the Republic of Ireland have all introduced ambitious schemes to support their self-employed and freelance workers; the UK must follow suit.
We should look to the examples set by other countries’ governments in supporting self-employed and freelance workers. Norway has included the self-employed and freelancers within its income protection scheme – they are entitled to claim the equivalent of 80% of their average pay over the past three years. I believe this is the best model, but other countries are also trying to help. The German government has plans for a €40bn fund, made up of grants and loans, to support individual freelancers and businesses employing below ten people. The Irish government has introduced a new COVID-19 “pandemic unemployment payment”, available for all workers including the self-employed, of €203 per week for six weeks. In France, the self-employed may be entitled to compensation up to €1,500; in Italy, they are entitled to €600 per month; and the Greek government is issuing payments of €800.
The UK is the world’s sixth largest economy. There is no reason we cannot afford to match the support extended by these countries to self-employed workers. I believe the government should extend the income protection scheme announced on Friday to the self-employed. In Norway, a scheme similar to the one unveiled by the government also makes provision for the self-employed and freelancers. They are entitled to the equivalent of 80% of their average pay over the past three years. We could do the same using tax returns.
The government must also, as a matter of urgency, increase the rate of statutory sick pay to the real living wage to support those who are sick or self-isolating, and ensure that no parent loses out if they are forced to take on extra childcare responsibilities due to school and nursery closures.
The government is facing immense challenges on all fronts. However, if we want people to be able to follow the government’s own guidance to curb the spread of this pandemic, then the situation of many people in the most precarious work and living conditions must be treated with greater urgency. And to ensure we have an economy to rebuild after coronavirus we should do all we can to support fledgling businesses and the self-employed. I believe that proposals along these lines would provide essential protection for millions of hardworking people who are crying out for reassurance.
We must support renters and the self-employed
The measures announced by the Chancellor of the Exchequer on Friday were extremely welcome. The government’s income replacement scheme will ensure that millions of workers’ jobs and livelihoods are protected over the coming months. But there are still gaps within the government’s strategy that require urgent redress, and millions more people who remain acutely exposed to the economic impact of necessary measures to contain the spread of Coronavirus.
If we as a society are to get through this together, we will need equality of sacrifice. As we ask every person and every worker to make sacrifices, so we should expect that every worker enjoys protection against lost work and income.
In particular, two groups need further support over the coming months:
First, the self-employed and freelancers who have lost work as a result of the response to Coronavirus. Around 5 million people are self-employed in Britain. While employed workers are covered by the new income replacement scheme, there are many who are self-employed, freelance or otherwise precarious who are not covered. Currently, should they lose work or be unable to work, they only have recourse to Universal Credit at a rate equivalent to Statutory Sick Pay of £94.25. And as they are not covered by the government’s income replacement scheme, they are also in danger of losing income if they cannot work due to the extra burden of childcare commitments now schools and nurseries are closed.
It is arbitrary that the self-employed should see the large part of their income disappear, while other workers enjoy government protection. As the Federation of Small Businesses have argued, ‘it cannot be right that an employee currently earning £25,000 a year could access £20,000 per annum through the new job retention scheme, while someone who’s self-employed earning the same sum might only access around £5,000 worth of support.’ Norway, Germany, Italy and France have all introduced ambitious schemes to support their self-employed and freelance workers; the UK must follow suit.
Finally, support for renters has not gone far enough. The temporary halt on evictions and the option of a payment holiday might spare pain for renters today, but once this over, it is likely to leave many tenants with huge backlogs of debt to their landlord that they are unlikely to ever be able to repay. Housing Benefit capped at 30% market rate is inadequate to the task. Two thirds of private renters and eight in ten social renters — a total of six million households — have no savings to fall back on. At the moment, government advice urges landlords to ‘show compassion’ to renters. But tenants should not be forced to rely on good faith or charity of landlords.
We should look to the examples set by other countries’ governments in supporting self-employed and freelance workers. Norway has included the self-employed and freelancers within its income protection scheme – they are entitled to claim the equivalent of 80% of their average pay over the past three years. I believe this is the best model, but other countries have also taken a lead on this. The German government has plans for a €40bn fund, made up of grants and loans, to support individual freelancers and businesses employing below ten people. Other countries, like Italy, Greece and France offer different forms of cash payments of €500 and upwards for self-employed and freelancers, as well as for key workers in healthcare or policing who need childcare.
I believe the government should introduce changes along the lines of the following to support these groups in this difficult period:
i) Extend the income protection scheme announced on Friday to the self-employed. In Norway, a scheme similar to the one unveiled by the government also makes provision for the self-employed and freelancers. They are entitled to the equivalent of 80% of their average pay over the past three years.
ii) Increase the rate of statutory sick pay to the real living wage to help those who are sick or self isolating.
iii) No parent should be penalised if they are forced to take on extra childcare responsibilities due to school and nursery closures – so they must be entitled to the income replacement scheme in these circumstances.
iv) Increase housing benefit to be paid at 50% of local market rates.
The government is facing immense challenges on all fronts. However, if we want people to be able to following the government’s own guidance to curb the spread of this pandemic, then the situation of many people in the most precarious work and living conditions must be treated with greater urgency. I believe that proposals along these lines would provide essential protection for millions of hardworking people who are crying out for reassurance.
This pandemic exposes the problems in our labour market
The government needs to do much more to support people and businesses through the coronavirus pandemic.
At times of national and global crisis, only governments have the resources to protect our society, our health, our businesses and our workers.
Markets cannot protect the vulnerable, direct our national economy and channel help where it is most needed.
That is why the Government must outline a far more extensive package of measures that go well beyond those already announced,
The Prime Minister pledged everyone will be supported to do the right thing. We all want that, but at the moment that is not the case. For many, the right thing is not to go to work and risk spreading this virus, but to stay at home. If we want people to do the right thing, we must support them.
A key change must be to ensure people have access to statutory sick pay (SSP) and at a level that is much higher than the current meagre £94.25 a week.
The Government must also look at who is eligible for SSP. The self-employed or those who earn less than the lower earnings limit of £118 a week will not qualify – denying the benefit to many of those who will need it most.
Similarly, now that parents will be forced to take time off to look after their children, they will need support too.
As social distancing measures are stepped up many fear they will lose their job – others have already – because work has dried up. Some will have to wait in the five week queue for universal credit or Employment and Support Allowance. That is not supporting people to do the right thing.
The Resolution Foundation published evidence that 60% of people on low and middle incomes have under £100 in savings. They will have no way of paying the rent, mortgage or put food on the table if their wages stop.
We must offer far more help. In Norway, full pay is given to those laid off for 20 days. In Sweden, laid-off workers are guaranteed 90% of their income: the Government will pick up half of that and employers are expected to pick up the other half. In Denmark, the Danish state will pay 75% of the salaries of laid-off workers. If it is good enough for workers in Denmark, Sweden, Norway and elsewhere, it is good enough for workers here too.
When this pandemic passes and people want to start spending again in shops, restaurants, bars and theatres and to travel on aeroplanes, trains and busses, we need to ensure the economic fabric of our country is intact.
The best way to do that is to ensure that workers stay in their jobs or attached to the businesses they were employed by. The economy will rebound far more quickly if the Government introduces a system of income replacement which will assist with that – and I would urge them to do so without further delay.
This global pandemic has thrown into sharp relief some of the problems in our labour market and in our social security system. When this is all over we cannot go back to business as usual.
If people cannot survive on statutory sick pay when there is a global pandemic, they cannot survive on £94.25 a week at any other time.
And the changes needed are even more fundamental than that. We must examine how our labour market works. We have one million people on zero-hour contracts and almost five million who are self-employed. Many of them struggle to make ends meet or have precarious earnings.
I’m the months ahead we should ask deep questions about how our economy works and who it works for, because whether we are in the midst of a global pandemic or not, there are too many people in our country that our economy, our labour market and our society does not work for. That has to change.
Published 19/03/2020
From action on sick pay to tackling climate change, a missed opportunity
The chancellor could not be more wrong when he used his budget to talk about the “strong” foundations of our economy. The reality is that the coronavirus pandemic has exposed deep structural flaws.
The virus has thrown into sharp relief what is really happening in our labour market, where work has become ever more insecure. Workers have had their protections and rights eroded and suffer from a culture that expects constant availability and gives no leeway for workers with additional burdens or responsibilities.
In what is for many a precarious work environment, 4.7 million people are self-employed. Many choose to be; others have no choice. There are a million people on zero-hours contracts. Many of them have no recourse to statutory sick pay.
This makes Rishi Sunak’s failure to support them in the face of the coronavirus outbreak all the more concerning. At prime minister’s questions, Boris Johnson said that no one would be penalised for doing the right thing when it comes to combating the impact of the virus. However, the chancellor’s announcements around sick pay and access to benefits for people who have to self-isolate tell a very different story. At just £94.25 a week, statutory sick pay is around 40 per cent of what you would take home if you were earning the minimum wage.
Punishing people financially for self-isolating will worsen the impact of the outbreak. We should be very worried about the choices people will make if they’re put in the impossible position of deciding between protecting themselves and putting food on the table or paying rent and mortgages.
We know that 16 million people in this country have savings of less than £100 and that 60 per cent of people on low and middle incomes have no savings whatsoever. The welfare system needs to support people when they need it.
But it is not just on sick pay where the chancellor missed an opportunity to ensure we are best placed to mitigate the impact of coronavirus. All those who work in our social care sector are in the front line in this battle.
Already, one in seven adults has unmet care needs. And now a sector that is hugely reliant upon precarious labour is going to bear much of the brunt over the coming weeks and months. Yet the chancellor was silent on the question of social care. There was nothing in the budget about support for local councils and their role in supporting social care and public health. In the coming weeks, the chancellor must think hard about what help he can give them to boost social care at this critical time.
There were, however, elements of the budget which I do welcome, such as the extra funds for the NHS and the long-awaited investment in flood defences. I hope this will include the £23 million still needed to properly protect Leeds from a repeat of the devastating floods we endured in 2015.
We have had to wait a long time for this budget – and it should have spoken to our future ambitions too. Ahead of the COP26 conference later this year, the chancellor should have seized the chance for Britain to take a leading global role in fighting the climate emergency.
Instead, he showed this is still a greenwash government when it comes to the environment as he unveiled plans to spend £27 billion on building 4,000 miles of roads and £2.7 billion on another fuel duty freeze.
The fact that there was just £6 billion for local transport and £140 million for a one-year extension of the electric vehicle grant shows the government has failed to recognise the scale of the challenge we face.
Even before the impact of coronavirus is included, growth of 1.1 per cent is predicted for this year. By the end of this parliament national debt is forecast to reach £2 trillion — double what the Conservatives inherited from Labour in 2010.
If you stunt growth by failing to invest, by discouraging businesses from investing and by allowing productivity to stagnate, you choke off the growth we desperately need to raise living standards, reduce the budget deficit and pay back the national debt.
He may have been in post for barely a month, but this chancellor’s first budget only served to confirm that austerity was a failed experiment that came at cost we will all bear for years to come.
Published 12/03/2020