IFS warns fifth of self-employed ineligible for Covid support

IFS warns fifth of self-employed ineligible for Covid support

The Institute for Fiscal Studies (IFS) has criticised the government for leaving out individuals from its Covid support scheme, warning that a fifth of self-employed people are ineligible to claim.

In a briefing on its website, published today (November 3), the IFS admitted giving targeted support to the self-employed was a “real challenge” but warned the current scheme ignored how badly an individual has been affected by the pandemic, and excluded a lot of self-employed workers.

The IFS estimated that 18 per cent of those for whom self-employment makes up at least half their income are ineligible for the Self Employed Income Support Scheme (SEISS), and 38 per cent of those with any self-employment income.

Research from the think tank Resolution Foundation found two-thirds of those who could not claim for SEISS have seen a decline in income, and about a sixth were not working at all.

Although the Chancellor announced yesterday (November 2) that grants will be doubled and calculated on the basis of 80 per cent of average earnings for the month of November, the eligibility criteria remains the same.

The IFS said there is likely to be a significant fraction of self-employed workers who will see significant income losses as a result of the coming lockdown but will still receive little support. 

The IFS stated: “For those that are ineligible because they did not file a tax return in 2018-19 – perhaps because they only recently started their business – it is harder to see how the government could reach them to provide support. 

“But the ineligibility of others – those who get less than half their income from self-employment, or who have profits over £50,000 – is a specific policy choice.”

‘Crucial lifeline’

Those who are excluded would normally turn to Universal Credit for support, but prior to the latest rule change the minimum income floor (MIF) had prevented this avenue.

The government announced this afternoon that it will extend the suspension of the MIF until the end of April next year.

It was originally due to finish next week (November 12).

Prior to its suspension, the MIF made it very difficult for many self-employed people to access Universal Credit because of their naturally fluctuating income levels.

Derek Cribb, chief executive officer of IPSE (the Association of Independent Professionals and the Self-Employed), said today’s extension will keep a “crucial lifeline” open to hundreds of thousands of self-employed people.

He said: “The MIF has historically hindered or prevented struggling self-employed people from accessing Universal Credit.

“Since the government suspended the MIF, however, Universal Credit has become a crucial lifeline for hundreds of thousands of self-employed people who do not have access to other forms of support.

“Many of these freelancers’ incomes were wiped out in the first lockdown: Universal Credit will be essential for sustaining them through the coming months.”

Payment issues

The IFS also criticised the timing of payments.

It found during the two-month wait between the beginning of the first lockdown and the first SEISS payment, claimants had reduced their spending by about 13 per cent compared to similar households who had not seen any change in income.