Bill Jamieson: There’ll be a big scramble for self-employed lifeboat

Rishi Sunak's aid package was more generous than expected. Picture: Pippa Fowles/Getty

Last week national attention swung to that most varied and least homogenous group of all – the self-employed.

For years they have been treated like dirt on a shoe – marginal to the well-being of the economy as a whole, barely figuring in budgets and business surveys: little people in the main – until we need them.

They span a myriad of skills and circumstances, and their livelihoods so multiple as to defy categorisation. Their work and income flows are erratic. Many work part-time, and amid lurid tales of huge incomes and tax dodging, average earnings are reckoned at just £10,000.

There are more than 320,000 in Scotland, heavily concentrated in Glasgow (29,800) and Edinburgh (28,400), but with large swathes of the rural economy vitally dependent on self-employed workers (Aberdeenshire 19,200, Dumfries and Galloway 14,600, Moray 8,000).

Across the UK overall there are five million, generating some £300 billion for the economy. When we hit a household emergency, it is the nearest local builder or plumber we ring. And their skills are universal – from dressmakers to joiners, accountants to care workers, florists to child minders, website designers to hairdressers – we call upon this army on a daily basis.

As the entire economy went into lockdown in the past two weeks, many were desperately awaiting a lifeline from Chancellor Rishi Sunak’s package of emergency support. Why so long a wait? Try designing a package for a vast group so complex and disparate, that helps those in a critical state but avoids payment to those in little need – and a package that is not open to abuse.

The self-employed were not covered by earlier measures but acutely needed help, particularly those with least resources to shield them from the tsunami-like effects of the coronavirus storm. Desperate accounts emerged from care workers, freelancers, bakers, hairdressers, builders and repair people. Businesses that took years to build up and are surviving on the thinnest of margins now face destruction.

Who is – and isn’t self-employed? Roughly one million were self-employed last year but are not now. Another million who weren’t self-employed last year now are. The wages of the self-employed can be lumpy, irregular and intermittent. Defining a regular pay packet is hard and difficult to do accurately. Then there are tax details – HMRC does not hold these for many self-employed people who file their tax returns in arrears.

Given all this, try alighting on measures that are administratively simple, that HMRC and government departments can cope with – and that can be rolled out quickly. This is a huge lifeboat that millions are scrambling to fill – but which requires an army of officials and form checkers to handle.

In broad terms, the package for the self-employed was more generous than expected. If they have suffered a loss in income, a taxable grant will be paid to the self-employed or partnerships, worth 80 per cent of their profits up to a cap of £2,500 per month. This will be available for three months in one lump-sum payment and will start to be paid from the beginning of June.

The scheme will be open to those with a trading profit of less than £50,000 in 2018-19, or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19. Those who were trading in the last financial year and still trading now will be able to apply. More than half of a claimant’s income needs to come from self-employment.

The Federation of Small Businesses – who spearheaded calls for additional help for those who work for themselves – warmly welcomed the proposals. Andrew McRae, FSB’s Scotland policy chair, said: “Thousands of people who work for themselves in Scotland will now breathe a sigh of relief. This scheme will provide lifeline cash to self-employed people, with help targeted at those on low and moderate incomes.

“We need to vanquish the myth that those that work for themselves are universally wealthy. People like the local handyman, cleaner and fitness coach will benefit from this support.”

But barely had the Chancellor finished speaking than the airwaves reverberated with criticism from thousands who stood to receive no benefit at all. Top of the list was that the first payments from this package are not expected until June – and by that time many sole traders will be severely stretched, if they have not already gone under. As work has dried up, many just do not have the savings that could tide them over for this length of time.

But support is increasingly available. The retail, hospitality and leisure sectors along with aviation industries will be aided by rates relief to support them during the epidemic. New regulations introduced to the Scottish Parliament confirm 100 per cent rates relief for these sectors for the whole of 2020-21. This will cover a range of businesses, including restaurants, bars, pubs, cafés, shops, cinemas, bingo halls and letting agents. They form part of a Scottish Government £2.2bn plan to support businesses.

What of the bigger picture? Widespread lockdowns and social distancing in economies affected by coronavirus are set to cause a massive negative short-term impact on consumer spending and GDP. A large chunk of consumer spending is discretionary and thus sensitive to being postponed or lost completely due to quarantines and social distancing.

According to Oxford Economics, the early evidence from China supports the idea that up-front effects will be large, with retail sales down 20 per cent year-on-year in January-February and industrial output over 13 per cent lower, due to widespread factory closures. Sectoral indicators in advanced economies point to huge declines in activity in sensitive areas.

It estimates that a three-week lockdown affecting 50 to 90 per cent of a population would cut consumption in a three-month period by five to eight per cent, a six-week lockdown would cut consumer spending by nine to 16 per cent and a 12-week lockdown would slash it by 18 to 32 per cent.

Whether the recovery will be V-shaped or U-shaped hardly matters at present. Whatever its shape, it cannot come soon enough.