A HOLLAND-derived scheme where the self-employed support each other financially through ill health, injury or loss of earnings, should be piloted by the next Scottish Government to address shortcomings in support.

The Federation of Small Businesses (FSA) in Scotland has suggested a collective insurance scheme could help restore confidence in a sector that had been “knocked for six” by the pandemic.

A major study, commissioned by the FSA and involving 700 small business owners found that three fifths (420) felt the Covid crisis had made self-employment less attractive as a career option because of the financial risks and lack of security.

When sick pay was established by the National Insurance Act 1911, it was felt that the well-off and middle-class self-employed didn’t need it.

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While this way of thinking is now said to be out-dated, the FSA say the Scottish Government is limited in what it can do to address the issue, because social security is controlled by Westminster.

After the Dutch government abolished sick pay for self-employed people in 2004, several members of a co-operative network decided to set up their own system.

The government had recommended they take out income protection insurance but with insurance premiums high, they created a peer-to-peer alternative called Broodfonds (Bread Fund).

There are now more than 600 bread funds in the Netherlands, covering 30,000 self-employed people in almost 200 areas. Around 20 -50 members put from 33 to 112 Euros into the fund every month after paying a one-one registration fee, which provides an income for those experiencing financial hardship.


Barry McCulloch, Head of Policy at the FSA said: “In the context of Scotland and the powers that the Scottish Government has at its disposal, there are limited ways in which they can support the self-employed.

“Thinking about what they can do, we have looked at what has been going on in the Netherlands for well over a decade whereby the self-employed help themselves through a peer-to-peer network.

“For us, it’s about thinking about how you put a safety net in place for well over 300,000 people in the labour market who at the moment don’t get sick pay or income protection and we think that bread funds are a pragmatic way in which they can support each other. 


“The UK have put in place temporary schemes while the Scottish Government have put in place a whole raft of Covid grants, acknowledging that these businesses don’t have anywhere to go.

He says a pilot set by the Royal Society of Arts (RSA) in 2017 “had decent results” and believes small business owners and self-employed workers in Scotland would be receptive to the idea, particularly in the creative sector.

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“If you look at what’s gone on in the past year, lots of people have pulled together and have gone far beyond what they had to do to help themselves, their staff and freelancers.

“I can see lots of people in certain sectors like the creative sector where there is a real, strong sense of cohesion and identity, I can see this being a useful place where it could be piloted.

“Our feeling is, if it can work in the Netherlands, it can work here.”

Louise Hamill, a former doctor, runs a homecare business and a digital company that was involved in setting up a contact tracing app - safe2go - for businesses. She believes a collective insurance scheme would be warmly received by the small business community.


She said: “I think now that businesses have been exposed to a pandemic, it brings into close focus the likelihood of another pandemic or something similarly catastrophic. To have that back-up would be amazing.”

The FSA said it would also like to see maternity, paternity and adoption payments extended to the self-employed via Social Security Scotland and a Small Business Recovery Act to ensure smaller firms win a fair share of public contracts.

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Dr Anne Smith, a Senior Lecturer in Entrepreneurship and Innovation at Glasgow Caledonian University, said the creation of bread funds would meet the needs of some self-employed workers but not all.

She said:  “It is important to appreciate the heterogeneity of  the self-employed group,  there is great diversity and right now many are struggling desperately, financially and emotionally.

“Enterprise policy must respond and perhaps bread funds may provide the starting point for a route back to economic stability for some, but they would be unlikely to meet the needs for all groups of self-employed.”

The study, which was conducted by Diffley Partnership for the FSB, also found that only a fifth of owners thought that the last Scottish Government valued their contribution.

Around half of the respondents (51%) said that policymakers should keep overheads (e.g. rent and rates) as low as possible to boost the recovery.

Asked to identify the biggest barriers to growth 52 per cent of Scottish businesses highlighted the state of the economy, 50 per cent pointed to the pandemic, and 30 per cent said Brexit.

A spokesman for the SNP said: “With powers over statutory sick pay, maternity and paternity pay, and other key areas reserved to Westminster, this report clearly emphasises the need for Scotland to be an independent country with full control over powers so we can take the necessary steps to build a fairer employment and social security system that meets people's needs."