What help will the government give the self-employed?

    25 March 2020

    There is a golden rule of all economic crashes: it is the self-employed who get stuffed the most. But it has never been like this. A week ago, the Chancellor, Rishi Sunak, unveiled a package to help the many millions of employed people who are threatened with the prospect of losing their jobs. The state will pay 80 per cent of their wages, up to a maximum of £2500 a week, while they are laid-off – or furloughed, as Sunak likes to say. This will last as long as necessary – Sunak will do ‘whatever it takes’,  as he tells us.

    But exactly what he plans to do for the self-employed isn’t clear. There have been rumours that he will offer something, but a week on, still no help has been announced. Liberal Democrat MP Munira Wilson has tabled an amendment to the emergency bill to try and effect pay parity for the self employed during the crisis but it is doubtful whether this amendment will be accepted in its current form.

    As it stands, the government has further undermined the ability of the self-employed to make a living, by closing every bar, restaurant and non-essential shop, and, from Monday night, placing the entire country under house arrest. Asked on Tuesday morning whether tradesmen such as electricians would be allowed to go about their day-to-day work, Michael Gove said not – they should only respond to emergencies, where someone’s house has become uninhabitable because, say, their boiler has broken. In the same interview, he suggested that the likes of Amazon could carry on delivering books, toys and any kind of non-essential luxury. The government is doing what it can to help the biggest of businesses, while the self-employed have been deprived of work and offered little in its place.

    Three years ago Philip Hammond attempted to raise the National Insurance Contributions paid by the self-employed to the same level as those paid by employed staff – a quest in which he was supported by the Institute for Fiscal Studies (IFS), among others. It was wrong, he said, that the self-employed should pay two percent less when they are eligible to receive pretty much the same state benefits.

    Except they are not, and never have been. The government’s response to Covid-19 shows just how wide the gulf is. Self-employed people who find themselves without work as a result of the crisis are at present eligible for nothing other than ordinary state benefits – a colossal injustice when the state is paying 80 per cent of employees’ wages. It doesn’t end there. Almost all self-employed, needless to say, will have suffered a collapse in the value of their pensions in recent weeks – while final salary pensions enjoyed by many public sector workers remain unaffected.

    That Covid-19 is going to spark an economic collapse sharper than the Great Depression is now pretty inevitable (although hopefully it won’t last as long). No doubt economic growth will rebound when the restrictions on daily life and work are lifted. But what is it going to do in the longer run for the spirit of enterprise? Over the past 40 years Britain has been transformed from a country where many workers thought they had the right to a job for life, to one where increasing numbers have left secure employment to make a go of it themselves. Anyone who attempts this is constantly stalked by the risk of failure. But in this crisis, unlike in any other recession, the rug has been pulled from beneath millions of the self-employed – without them being able to do a thing about it.

    Why would anyone want to take the risk of investing in a café, a plumbing business or anything else after the experience of this year? We’re heading back to the age when the first thought of most British workers was to seek the comfort and security of public sector employment. The concept of coming up with an idea and seeking to better yourself by stepping outside the security of employment is going to take a long, long time to recover.