LABOUR has called on the UK Government to urgently revisit its income protection schemes after the Institute for Fiscal Studies identified “gaps,” resulting in some workers receiving generous support and others receiving none.
Highlighting the gaps, John McDonnell, the Shadow Chancellor, said: "The Government must now urgently revisit both its job retention scheme and its self-employment scheme.
"It is unacceptable that carers, those on shorter working hours, and new starters who began work after February 28 are not covered by the job retention scheme and that two million self-employed people 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," he added.
In its analysis, the IFS explained that, inevitably, for schemes hastily put together, the temporary measures were not as well targeted as could be expected in normal times. While, on average, they were very generous schemes - replacing more than 80 per cent of net family income for both employees and the self-employed - there was a lot of variation.
“Many of the self-employed will be left financially better off as a result of this crisis, while some will get no support at all,” the think-tank pointed out.
It explained that on average both employees and the self-employed would have the great majority of their income replaced if they were furloughed or their business closed completely.
If employees were furloughed they would only lose about 12 per cent of net family income, compared to 53 per cent before the reforms while if the self-employed saw their business close completely, they would only lose about 14 per cent of family income compared to 44 per cent before the reforms.
The IFS pointed out that many of the self-employed whose income dried up would receive both Universal Credit now and 80 per cent of their historical earnings for three months at the start of June. “Their total compensation is more than 80 per cent of their earnings and could be more than 100 per cent,” it noted.
Also, if self-employed workers saw only a small fall in their profits, half would have a family income more than 20 per cent above its usual level once the Government’s Self Employed Income Support Scheme was fully in place, since they would receive the full SEISS payout even if they only saw a small reduction in their profits.
By contrast, some two million people with some self-employment income, those whose profits were more than £50,000 a year and those who began their business after April 2019, would not benefit from the Government scheme.
On the Job Retention Scheme, the think tank said it would not provide support for those who lost their job completely, who had to take unpaid leave to cover caring responsibilities - for example looking after their children - or who saw a cut in their earnings but continued to work.
Stuart Adam, a Senior Research Economist at the IFS and one of the authors of the report, 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 benefitting 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.”
He added: “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 with employment or whose business is set up as a company.”
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