Coronavirus: Why is it taking so long to help the self-employed?

By Simon Jack - Business editor
A textile designer in a studio

There are five million self-employed people in the UK, generating about £300bn for the economy.

But while the government moved last week to subsidise the wages of direct employees, there is still no support package in place for this significant part of the workforce.

How come?

It's important to note that government officials and civil servants are working round the clock to try and fix this under extremely trying circumstances.

Our first thoughts are rightly with the heroic efforts of frontline services like the NHS. But in economic terms, these people also deserve our respect and thanks for trying to tackle a crisis not seen in our lifetime.

How to best help the self-employed is a very difficult issue to address for many reasons.

First, it is not straightforward to identify who is and who isn't self-employed.

Of the five million defined as self-employed at any one time, roughly one million were self-employed last year but are not now. Another million who weren't self-employed last year now are.

Second, the wages of the self-employed can be lumpy, irregular and intermittent. Defining their regular pay packet is very hard and therefore difficult to underwrite accurately.

Third, HMRC has the bank details of those that are on the Pay as You Earn (PAYE) tax system. But it does not hold those details for many self-employed people who file their tax returns in arrears.

Fourth, the Treasury claims that some self-employed people may be unaffected by the current situation and in some cases may be doing fine (although I'm struggling to think of many examples of this).

How does the government know that it isn't giving tax payers' money to people who don't need it?

Wage subsidy proposal

Having said all that, there are some ideas on how to do it.

The Liberal Democrats have proposed a solution based on a Norwegian plan.

In a proposed amendment to the Coronavirus bill, they suggest self-employed workers should receive payments of 80% of their monthly net earnings, averaged over the last three years, up to a cap of £2,917.

Co-leader Sir Ed Davey told the BBC that he recognised this plan does not address all - or maybe any - of the problems above, but insisted "the perfect should not the enemy of the possible".

He said that a "clawback" feature should be part of any plan so that when the self-employed filled in their tax returns in future, any money they earned above these measures should be repaid.

The imperative is to get the money out there and police it retrospectively.

Payments would be capped, temporary and repayable where it turns out it wasn't needed.

Any policy of sufficient size designed with sufficient speed is bound to have holes in it and possibly be open to abuse. The business support packages already announced are riddled with holes.

But as I've said before, at times like this speed is of the essence.