Self-Employment Support Scheme poorly targeted, says Resolution Foundation

By agency reporter
October 27, 2020

The Government’s £12.7 billion Self-Employment Income Support Scheme (SEISS) has been poorly targeted at those in need – with over 400,000 workers claiming support despite not losing any income during the crisis, while almost 500,000 people still without work have received no support at all. This is according to a major new Resolution Foundation report to be published later tomorrow (28 October 2020).

The report – which includes a new detailed online survey of 6,000 18-65 year olds across the UK – looks at the changing state of the UK labour market six months into the crisis, what the future holds, and how Government policy will need to respond.

It notes that while most of the focus has been on employees – and the unprecedented levels of furloughing that have taken place since April – self-employed workers have experienced an even bigger labour market shock.

At the height of the crisis in April, three-in-ten self-employed workers (30 per cent) stopped working altogether. While work has resumed for many, the pace of recovery for the self-employed has been slow, with around one-in-six (17 per cent) still without work – rising to almost a quarter (24 per cent) of 18-34 year olds who were self-employed pre-crisis.

Faced with this huge economic shock, the Government rightly introduced unprecedented support – the £12.7 billion SEISS.

The Foundation notes that up until the end of August, the Government has spent more than twice as much supporting each self-employed worker (£2,518) through the SEISS than it has supporting each employee through the Job Retention Scheme (£1,128).

However, the report warns that this support has been very poorly targeted. Of the 42 per cent of self-employed workers surveyed who have claimed the SEISS, one-in-six (17 per cent, equivalent to 435,000 workers) did so despite having experienced no loss of income throughout the crisis – at a cost of around £1.3 billion. Four-fifths (78 per cent) of SEISS claimants experienced an income loss, although in many cases it will have been smaller than the amount of SEISS claimed.

By contrast, two-thirds (67 per cent) of self-employed workers who hadn’t claimed the SEISS have experienced a loss of income during the crisis – and therefore needed support. Close to 500,000 self-employed workers who were still without any work at all in September had received no SEISS support.

This Foundation says that the combination of strict eligibility rules – which excluded many new or higher income self-employed workers from any support – and weak assessment rules – where applicants were not asked to show that they had been hit financially by the crisis – are the reason the SEISS has managed to be so expensive and poorly targeted.

With a less generous version of the scheme still operating and calls to re-start the scheme in full growing amid tighter lockdown restrictions, the Foundation says that the government should fundamentally reform it with fewer exclusions and payments more accurately reflecting income falls.

It adds that with so many self-employed workers relying on Universal Credit instead, the Government should focus on making the UK’s main safety net work better for these workers.

This should include extending the suspension of the Minimum Income Floor to stop UC penalising low-earning self-employed workers, and suspending the capital rules that prevent self-employed workers with significant savings from being eligible for support.

Hannah Slaughter, Economist at the Resolution Foundation, said: “The UK’s five million self-employed workers have been at the heart of its jobs crisis. A quarter of young self-employed workers are still without work today.

“The Government has provided unprecedented support in response. But it has been terribly targeted – with around £1.3 billion going to freelancers and businesses unaffected by the crisis, while others suffering catastrophic income losses have missed out on any support at all.

“This crisis is far from over for the UK’s self-employed workers. Future support should avoid excluding so many groups, while ensuring payments reflect genuine falls in income. And an immediate priority should be to strengthen Universal Credit for the many self-employed workers who will really need it in the months ahead.”

* The full report will be published on Wednesday 28 October, and launched at an online webinar with CBI Director-General Carolyn Fairbairn and TUC General Secretary Frances O’Grady. Details here

* Resolution Foundation https://www.resolutionfoundation.org/

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