Coronavirus: Two million with some self-employment income will not benefit from government support scheme, IFS warns

An estimated two million people with some form of self-employment income will not benefit from the government’s coronavirus financial support measures, while some workers will fall through the gaps “completely”, an influential think tank has warned.

Analysing measures fast-tracked by Rishi Sunak, the chancellor, to help individuals and businesses through the crisis, the Institute for Fiscal Studies (IFS) said it was inevitable they were not as well targeted “as we would expect in normal times”.

The organisation said that both the job retention scheme and the self-employment income support scheme (Seiss) were generous on average, replacing more than 80 per cent of net family income for workers, but there was a lot of variation.

While the IFS added that some self-employed people will be financially better off due to the coronavirus measures, it claimed others will get no support at all.

They estimated 1.3 million people would not benefit from the self-employment scheme because they received less than half of their income from self-employment, while a further 225,000 would be ineligible as their profits exceeded £50,000 per annum. A further 650,000 would not be able to use the new financial support scheme as they started their business after April 2019.

The IFS added: “These three groups overlap, so our rough estimate is that in total around two million people with some self-employment income will not have it covered by the Seiss.”

It comes after The Independent revealed earlier this week the government’s eligibility cut-off date for the job retention scheme left potentially thousands of workers having no choice but to apply for benefits through the universal credit system.

Under the new system, those not on an employer’s PAYE system before 28 February – three weeks before Boris Johnson imposed stringent restrictions on public life – will not qualify for furlough.

Senior research economist Stuart Adam said: “Under pressure to come up with a workable scheme to support the self-employed at speed, the chancellor has erred on the side of generosity for most. Being able to claim the full amount even if profits are affected only marginally will leave some self-employed benefiting substantially.

“The delay in payments will cause financial hardship for some, but the fact that they can claim benefits for the next three months, and then also claim the earnings replacement in early June, will mean many will ultimately lose little or no income overall.

“But some will fall through the gaps completely – including high earners and the newly self-employed – and others will see only part of their overall earnings covered, including many who combine self-employment or whose business is set up as a company.”

In response to the analysis, Labour’s John McDonnell said the government must urgently revisit both schemes, adding: “It is unacceptable that carers, those on shorter working hours, and new starters who began work after 28 February are not covered by the job retention scheme – and that two million self-employed are not covered by the self-employment package.

“We urge the government to consider proposals that we have put forward to adjust the support schemes so that no workers are left behind in this time of deep anxiety for so many.”

A Treasury spokesperson said: “We are taking unprecedented action at unprecedented speed to support businesses, jobs and our economy.

“Those who do not qualify for the scheme will be able to access a range of other support – including an increase in the universal credit allowance, income tax deferrals, £1 billion more support for renters and access to three-month mortgage holidays."