Many have praised the government’s support for businesses, employees and the self-employed during the coronavirus pandemic. Schemes like the Coronavirus Job Retention Scheme (CRJS) and the Self-Employed Income Support Scheme (SEISS) have helped ensure companies retain jobs and the self-employed continue to receive some income during a truly exceptional time.
However, is it really fair or equitable for the government to discriminate against specific groups in the design of these schemes? There are one million-plus workers who are ineligible for any support from either the CJRS or the SEISS arrangements. These left behinds include:
* People who were due to start work with new employers from March 2020 onwards;
* The self-employed who started their businesses after April 2019 (plus many workers who actually became self-employed in the 2018/19 UK tax year, who didn’t have enough self-employed income to be SEISS-eligible);
* PSC (person with significant control) owner-managers, who typically pay themselves through dividends rather than a regular salary;
* those involved in industries such as film and TV where one typically goes from short-term contract to short-term contract as a freelance worker.
Though credit needs to be given to the government for the development of these schemes – under extreme time pressure and without any precedents – it is time to recognise the shortcomings of the existing arrangements and push for something which is fairer, more equitable and protects the left behinds.
In designing the CJRS and the SEISS, it is clear the government made deliberate decisions to exclude some of the above groups. For example, ministers are clearly unhappy with the idea of PSC-linked workers paying themselves via dividends rather than salaries because of potential national insurance savings. Other groups have lost out because of the government focussing on “administrative ease” and a desire to keep things “simple”.
However, the government appears to not understand (or deliberately ignores) the wider factors behind these points. PSC owner-managers often pay themselves in dividends because their income (and specifically their cashflow) fluctuates significantly during the year and they don’t know what they can legitimately withdraw from the business as income until the accounts are drawn up and they understand their overall position. Similarly, people who were moving jobs in March – or move from job to job on a regular basis because that is the nature of their industry – haven’t done anything wrong. They have simply been ignored by the government for “ease” – as if ease is a legitimate reason for someone to be ignored by a government.
We recognise that ministers need to balance cost, administrative efficiency and the fraud risk, but as things stand it is difficult to see that either the CJRS or SEISS arrangements make any real attempt to find a legitimate balance between these competing factors.
The Commons Treasury Committee has highlighted that PSC-linked individuals are in the tax system and typically have a history of dividend payments that could be used as the basis of providing them with support – in exactly the same way that the SEISS arrangement is providing support for the legally self-employed. Similarly, it would be easy for the government to provide support to those who have historically been working and were due to start new jobs in March, April or later based on the offer letter they had received from their new employer.
The coronavirus pandemic has created economic uncertainty on an unprecedented scale. It will in due course require everybody who is working – as an employee, self-employed individual or as a PSC-linked owner-manager to face significant tax rises as the government recovers the costs of its various support schemes. As such, it is only fair to expect these support schemes to genuinely cover as many people as possible, rather than to simply leave more than a million people behind for weak reasons. Additionally and vitally, that approach risks undermining the economic recovery, as by ignoring large sections of the working population, the government is discouraging flexibility and entrepreneurial spirit – the very traits that will be vital over the coming years.