To ask Her Majesty’s Government what steps they are taking to ensure that their support for the self-employed during the COVID-19 pandemic is sufficient.
The Question was considered in a Virtual Proceeding via video call.
My Lords, the Government have taken a number of steps to support the self-employed at this difficult time. On 26 March, the Chancellor announced the self-employed income support scheme, which will provide eligible individuals with a grant worth 80% of their normal profits for three months. The Chancellor has also announced several other policies that might benefit the self-employed. These include the coronavirus business interruption loan scheme, mortgage holidays and an income tax deferral.
My Lords, this is necessary support but there remain concerns about fairness and people falling through the cracks. Will the Government look again at the £50,000 cap—a distinct unfairness compared with the JRS? Will they review the income threshold, which at 50% excludes many for whom a mixed portfolio is the norm? Can graduates and those who have been on maternity or sick leave have unrepresentative years discounted? Does the Minister agree that, from construction workers to music teachers, those paid through dividends should not be penalised for adopting a standard accounting system actively encouraged by Conservative Governments?
My Lords, delivering a scheme for the self-employed is a difficult operational challenge, particularly in the rapid timescale required. The Government’s priority is to get support to those who need it as quickly as possible, in the fairest way. The design of the scheme, including the £50,000 threshold, means that it is targeted at those who need it most, and who are most reliant on their self-employment income. Some 95% of those who are mostly self-employed will benefit; those who do not meet the eligibility criteria for the SEISS may have access to a range of other support, including the more generous universal credit and deferral of tax schemes. I hope to address the dividend points in answer to a separate question.
My Lords, will the Government give greater priority to speeding up the provision of financial assistance to SMEs, in particular through the new future fund?
My Lords, the Government are making sure that people and businesses have access to the support they need as quickly as possible. We have tried to design measures that can be made operational quickly and effectively. Lenders have increased the number of loans they are approving every day and staff are working to process applications as quickly as possible. Over 12,000 CBILS loans have been made to businesses so far, meaning benefits of some £2 billion in finance and the rate of approvals is accelerating.
My Lords, large numbers of freelance and self-employed workers operate as personal service companies. Indeed, employers demand this of them. This means that they receive the majority of their remuneration as dividends not salary, which disbars them from the SEISS. Will the Government consider accepting proof of dividend incomes from dividend certificates and self-assessment tax returns so that freelancers can fairly claim compensation on income earned through dividends from their own personal service companies?
My Lords, the policy for the proprietor of a business to take a dividend is a personal one. It is done largely to mitigate employers’ national insurance, so I do not believe that it is right for the Government to look at that as a form of income. A dividend is defined as the surplus of a business after all its expenses have been paid, profits retained and taxes paid. While we will keep an open mind, I do not think this is something we will be dealing with urgently.
The answer the Minister has just given is tremendously inadequate for many very small businesses that were advised by reputable accountants that this was the most tax-efficient way of taking, in many cases, very small levels of income from tiny businesses. I really must press the Minister. These people are not eligible for the self-employment income support scheme, find themselves now without any income, have commitments and are often operating on such tiny margins that taking out a loan is really out of the question in the medium term. Can the Minister tell us how many of these left-behind small businesses there are and what the Government will do urgently to address this and help them out, and when? It is simply not satisfactory to say, “They made that choice in the past, and now they must reap the detriment as a result.” This is very unfair.
My Lords, I will not repeat the arguments I made in an earlier response. We will of course keep it under review. Some 11 measures have been made available for a variety of self-employed people and businesses. I will not list them all now, but there is a pretty strong safety net. If there is evidence that some are falling through that net, we will of course keep an open mind.
Nothing the Minister has said will make insecure workers any more secure today, so can we try another line? There is, to coin a phrase, an oven-ready way of improving the rights and entitlements of many self-employed people. Can the Minister pledge that the Government will at last implement the Taylor review of modern working practices? It is time to give insecure workers at least some sense of security.
My Lords, we will certainly keep it under review. I am not able to give a cast iron commitment on that now. It is worth restating that the package of support we have announced over the last month is very substantial. Our policy has been to make it available in a number of different ways—unlike in some countries, such as Germany, where it has been a very targeted form of support. With these 11 different measures, we are confident that the vast majority of small business proprietors will have their situations protected.
Is my noble friend the Minister able to give any clarity on the timescale of the rolling out and when the funds will be available, particularly for the self-employed? He may well be aware that there are numerous scams targeting the self-employed and a great deal of uncertainty among them.
My Lords, I am very much aware of the urgency and speed with which these things need to be dealt. From midnight on 20 April, 185,000 businesses have claimed under the coronavirus job retention scheme to protect 1.3 million jobs, which totalled £1.5 billion. On the small business grant funding, as of 20 April around £6 billion had been paid out in grants, which is about half the total funding. Some 490,000 businesses have benefited—so the money is going out. I completely accept that it could go out quicker, but the rate of escalation is increasing.
Baroness Ritchie of Downpatrick. Baroness Ritchie? Okay, we will move on to the noble Lord, Lord Livermore.
My Lords, as noble Lords have made clear, there are significant gaps in the current scheme. My noble friend Lady Young asked about the numbers not covered by it. How many self-employed people will now see substantial reductions in their income as a result of not being covered by the existing scheme? Will the Minister consider additional measures to provide protection for them?
My Lords, we estimate that 95% of small businesses will benefit from the structure of the schemes we have been discussing. Beyond that, we have made enhancements to the universal credit system that will benefit small business proprietors who are caught and do not benefit from the broader measures. I can put into Hansard a detailed explanation of how those changes work, because they are quite complicated and I am conscious of the need for brevity.
The self-employed will have to wait another month before they can start applying for support, and it will be six weeks from now until the first payments. The Canadian Government announced support packages for the self-employed and the employed on 15 March, and payments started to be processed last week for Canadian businesses. What is preventing the Government fast-tracking support for self-employed people, who have this huge uncertainty, especially women and mothers who have to look after children and on whose income this will have a real impact now?
My Lords, as I mentioned earlier, we have pushed out some £6 billion of grant payments already, and when HMRC opened its Coronavirus Job Retention Scheme on 20 April some 185,000 claims had already been made. So the money is going out, but I accept that it needs to go out more quickly.
My Lords, the time allowed for this Question has now elapsed, and I apologise to the two Members who have not been reached.