Covid-19: urgent government action needed to support self employed

MPs and accounting professional bodies are calling on the government to put urgent measures in place to help the self employed and sole traders deal with the covid-19 crisis, including a business loan with a 15-year repayment term and extension of the 80% rule to self employed and gig workers

MPs have been inundated with calls to support the self employed while the influential Treasury Committee has received thousands of responses to its current call for evidence on the government's covid-19 financial support package. 

This follows last week's committee session with the Chancellor Rishi Sunak after the initial £330bn package of financial measures was announced. 

Mel Stride MP, chair of the Treasury Committee said: ‘The Treasury Committee has issued a call for evidence on whether the government’s financial response to coronavirus is sufficient, and if there are areas where more support is needed.

‘We have received over 14,000 responses, mostly on issues relating to self-employment, from people who work in a wide variety of professions, including childminders, taxi drivers and hairdressers.

‘This is clearly an area where further action is needed by the government. I’ve asked the Chancellor what additional support will be given to the self-employed, as well as a number of other key questions around additional NHS funding, how the government will communicate rapidly and effectively with businesses to make them aware of the available assistance, and how the government will be supporting charities.’

Stride has written to the Chancellor asking for clarifications on a number of the measures outlined last week, including how the 80% rule salary subsidy will be calculated in terms of income tax and NICs. 

There has been a wave of criticism about the lack of support for the self employed.

Yesterday management accountants body CIMA wrote to the Chancellor urging him to change the government's stance on the self employed and gig workers, and set out a number of radical proposals to support the self employed through the current crisis.

The proposals include a quick-to-access coronavirus loan scheme for self employed and sole traders to allow businesses and self employed to solve their current cashflow issues quickly and continue operating. 

This could take the form of a government-backed business loan for self-employed people with a 15-year repayment term, CIMA suggested.

Andrew Harding, chief executive at CIMA, said: ‘Based on the principles of the student loan and maintenance scheme, we should give self employed, sole traders and SME owners access to an immediate state-backed loan up to a maximum of £30,000 with 15 years to pay it back.’

They also want a basic three-month income grant for self employed and gig economy workers who are struggling with work and income losses to shore up their cashflow, pay the bills and spend in the economy.

Harding also wants to see the extension of the 80% rule to self employed and gig workers.

‘The government has stepped up to the plate to help employees through the Coronavirus Job Retention Scheme, but the self employed and gig economy workers are struggling more than ever to make ends meet’, said Harding.

‘Linked to the average earnings, we must give them a similar level of support as company employees and guarantees up to the £2,500 income threshold.’

Another proposal is to immediately reduce VAT to 15% to encourage spending, keep businesses afloat and boost the economy in the short-term.

Harding added: ‘Rising concerns around people and businesses’ abilities to pay their bills and survive the coronavirus crisis are holding spending decisions back.

‘Cutting VAT by 5%, which has proved an efficient tactic following the 2008 financial crisis, is easy to implement and would encourage larger spending decisions to keep cashflows and the whole economy running.’

They also recommend to consolidate communication channels for businesses, SMEs, self employed and individual consumers. With the number of schemes and policies being announced at a rapid pace, businesses and individuals alike find themselves overwhelmed by the flow of information.

CIMA also call for government to extend business rates holiday to all SMEs and suspend evictions to help struggling businesses preserve their cashflow and keep supply chains open, which would benefit the economy in the long-term.

CIMA understands the government is currently under huge pressure and strain, and has already provided businesses and consumers with measures that will help them.

‘We fully support these measures, but believe more needs to be done to support the micro business owners and self employed, who make an important contribution to our economy – we are calling for these suggestions to ensure that they are able to do so now and in the future’, said Harding.

The Chancellor Rishi Sunak is expected to join today's 5pm press conference so there may could be further announcements about support for larger businesses and the self employed.

Further reading:

Government to pay 80% of salary for furloughed workers [published 23 Mar 2020]

Chancellor sets out radical employment support package to protect jobs [published 20 Mar 2020]

Average: 5 (3 votes)