Sunak baulks at bail-out for self-employed

THE demands from Britain’s 5m selfemployed and freelance workers for a parallel bail-out to those on Paye has been unrelenting, and a useful tool for attacking the Government.

In many ways, this cohort has been a bedrock of Britain’s economic renaissance since the financial crisis of 12 years ago, with citizens using redundancy money to set up enterprises, moving into the fast-growing creative sector – from gaming to design – and bringing food and services to our doors as part of the gig economy. It would be cruel to let them go to the wall.

But it would be a mistake to think that this is a coherent group and that some kind of magic wand could be waved which would bail them out.

The data about their earnings is patchy and largely based on tax returns from the 2017-18 financial year, and suggests an average income of around £22,000 a year, which is well below the full time average wage of £30,420. The comparison is not, however, like-with-like. The self-employed, as small businesses, are able to charge a variety of expenses ranging from transport costs to utility bills and other services against their income – a facility not available to most Paye employees.

There are, in some cases, unrecorded cash transactions, which bypass the tax system altogether. Nevertheless, Chancellor Rishi Sunak recognises there is a case for looking after this group. One way is through the existing social security system. In his major economic statement of last week, Sunak did make provision for an extra £1,000 payment to those on benefits – helicopter money for the less well-off caught by the Covid-19 economic fall-out.

The big question facing Sunak and HM Treasury is how far to go in rescuing this group. The pressure coming from opposition benches and sections of the media is for a full rescue on similar conditions to Paye workers.

That would mean guaranteeing 80pc of their income, if it could be accurately assessed, which would mean looking over perhaps three years of tax returns – quite an administrative task.

The concern is that were the crisis to extend over many months, the eventual cost could be as much as £30bn to £40bn – even if the pay-outs were capped as they are for Paye employees. In the two big announcements since the Budget on March 11, the Government reckons it already has begun to stretch fiscal policy to the limits.

This, however, does not mean Sunak will do nothing.

He is looking at a range of options, such as guaranteeing income up to 50pc or 60pc of reported earnings.

Many self-employed workers might find that with extra benefits – such as housing allowances – the social security system is fit for purpose.

The self- employed are a diverse group ranging from rock stars – earning millions of pounds each year – to the person on their scooter delivering our pizza.

Bridging the gap and looking after those caught in the middle – using one simple rule – will not prove easy and is unlikely to satisfy anyone.