Delphine Strauss in London
It would cost about £1bn a quarter, a hundredth of the total spent on income support schemes since the start of the pandemic, to extend help to more than 1.5m of those excluded from the UK government’s scheme for self-employed workers.
About 1.8m of the self-employed and 700,000 company owner managers are not eligible for help through the Self-Employed Income Support Scheme, the Institute for Fiscal Studies revealed on Wednesday. The scheme pays grants worth 80 per cent of previous profits, up to a cap of £7,500, to those who have lost earnings because of the pandemic.
Some of those excluded can claim benefits or other forms of support but many are in acute financial difficulties. MPs from all parties have been pressing the government to overcome technical obstacles to broadening eligibility.
Applications for a third round of grants — for which the Treasury left eligibility criteria largely unchanged — close on Friday. However, the chancellor could decide to broaden access to the scheme when he sets out the terms of a fourth round of grants, likely to take place after the March Budget.
The IFS said it was technically very difficult for the government to give targeted support to company owner managers who pay themselves through dividends.
But the think-tank said the government had “actively chosen” to exclude 1.3m self-employed people who had less than 50 per cent of their income from self-employment, and 225,000 people who had profits in excess of £50,000 — resulting in “clear injustices” in the treatment of those whose income fell just above or below these thresholds.
Most of those whose self-employment earnings make up less than half their income have trading profits of less than £5,000 a year, and a total personal income below £25,000. Extending the SEISS to them would cost £500m to £800m a quarter, with average quarterly payments of between £600 and £1,000 per person, the IFS said.
Extending the SEISS fully to those with profits above £50,000 would cost £1.3bn per quarter, with a payment of £7,500 per person. But providing tapered support to those with profits between £50,000 and £100,000 would cost just £350m per quarter.
Giving full support to the first group, and tapered support to some high earners, would therefore cost around £1bn per quarter, the IFS said, noting that this would be just 1 per cent of the combined sums spent on the SEISS and the government’s furlough scheme.