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Mubin Haq: How can it be right for the Government to harm your business, leave you in need – and not help you?

Mubin Haq is the Chief Executive of Standard Life Foundation.

This week, the UK saw unemployment rise to five per cent, the highest level in five years. While it could have been a great deal worse, the economic outlook is far from rosy.

At this difficult time, the Government’s furlough and support for the self-employed (SEISS) have been critical; keeping people in work and helping millions of families stay afloat. The financial commitment to these schemes is likely to reach £90 billion by the end of April. However, too many have been excluded from these support packages.

Standard Life Foundation’s latest research, out this week, estimates that nearly four million people have been excluded from the income replacement schemes. These people do not qualify for Universal Credit either. That’s seven per cent of adults losing income without any support.

The scale of the problem is not new, although this new data shows it has reached a new high. The issue has been highlighted to the Treasury for months now. The National Audit Office, the Treasury Select Committee, the Public Accounts Committee and grassroots groups such as Excluded UK have all pointed out these gaps in our safety net.

The data shows that for nearly half of this number (1.8 million), their household income has been cut by at least one-third. That’s a massive fall in income. Not so much of a problem if you were already earning large sums, but our data shows many are struggling and have been for some time.

We found over a million excluded people are struggling to pay for food and everyday essentials. Nearly two-thirds are having trouble paying their bills. More than one in four have an income of less than £10,000. No wonder three-quarters of the excluded are anxious about their finances. There’s still time for the Government to act to plug these gaps in our safety net. To be frank, it’s long overdue, and a lot of people are getting desperate.

Half of those excluded have ceased to earn an income, and half are on reduced earnings/income, but receiving no additional support from the Government’s support packages. One-third are contract/agency workers or on zero hours contracts or work through online platforms such as Uber and Deliveroo. Unsurprisingly those in the most insecure forms of work and some of the lowest-paid are the most affected.

There are a range of reasons why many are not receiving support. For example, if you earn less than half of your income from self-employment, you don’t qualify for support from the SEISS. So if you have a part time job to pay the bills and a self-employed side-gig as a wedding photographer, there will be no help for you, even though the Government has effectively shut down your business. Our support packages don’t reflect the new working conditions many now operate in (or did, before the pandemic).

Moreover, the schemes have severe cliff edges. No help for the self-employed who’ve made profits of more than £50,000 per year, but full support for those who earned just £1 less. The furlough scheme has no such penalty for those earning more than £50,000. Extending the SEISS to this group would cost £1.3 billion per quarter, according to modelling by the Institute for Fiscal Studies.

There is much that can be done. Let’s remove those cliff edges such as that £50,000 cap. SEISS support should also be open to those who earn less than 50 per cent of their income from self-employment. The IFS estimates this would cost between £500 million and £800 million per quarter with average payments of between £600 to £1,000 per person. We could also incorporate new tax return data for 2019/20 enabling more of the newly self-employed to become eligible for the fourth round of SEISS.

Critically, we need to think again about the savings and household income limits on Universal Credit eligibility. Schemes in similarly wealthy countries offer much greater levels of support to people who fall on hard times.

There are lots of ideas that Ministers could try. The question is: why aren’t they?


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