Rishi Sunak has spoken. And if much of the media is to be believed then we should all be grateful.
I do not agree. What Sunak has suggested for the self-employed is not very dissimilar from what I proposed, subject to a rather curious wage cap which seems unfair: if someone has no income now then they have no income, and why they should be excluded from support is hard to work out.
Details of the coronavirus job retention scheme have also been announced. Once more the anomalies or as apparent as the support. Why, for example, someone who genuinely started work with a company on 1st March should be penalised is very hard to work out.
But, the much more important issue in both cases is the fact that there is an implicit assumption, also inherent in Universal Credit, that people without work do not need immediate support because they will all, inevitably, have resources to fall back on. For some this is true. For very large numbers it is completely untrue.
Remarkably, it seems as if the government is unaware of this fact. For example, it would seem that they think all the self-employed have savings or available lines of credit available to provide them with £7,500 of income to cover a three month period before the government might pay them when I am well aware that for a very great many that is completely untrue.
The result is that just when it is most needed it is now readily apparent that the social safety net in this country is remarkably weak. The test of it is a simple one: it is whether, or not, people in real need get support. As the late Rev Paul Nicholson demonstrated time and again, this was not true for many before this crisis began. What is now apparent is that the government has no intention of correcting this for a great many people. Whether they are just ignorant of need, or are simply indifferent, or just still have an austerity mindset that thinks they must be mean when the economy is crashing all around them, this is indication of incompetence.
There are those who think that Sunak has proved himself to be Prime Minister in waiting as a result of his performances in the last couple of weeks. I think it is apparent that I do not share that view. So far just 17,000 businesses have been granted a tax payment deferrals. 30,000 businesses have applied for loans, but there is no data on how many have been given, and I suspect that it is very many fewer. No employer, let alone an employee, will see any benefit from the job retention scheme until the end of April, at the earliest. And the self-employed will need to wait until June. Meanwhile, in the real world people will still have to make payment of many of their fixed obligations, almost none of which have been waived by statute. And give it only a week or two and increasing numbers of people will find it more and more difficult to make payment for basic necessities, like food.
Sunak should enjoy his moment of glory. No Chancellor ever rides higher than they do on the day after a policy announcement. Thereafter, at least during the last decade, things have always begun to unravel. I very strongly suspect that this will be the case for Sunak. When a collective appreciation that the government is really not supplying the support that people require to keep them and their families fed and in their homes emerges sometime soon the backlash is going to be fast, and furious.
And, sometime soon, the announcements are not going to be believed. We remain on the Italian death trajectory from coronavirus. There is no doubt that the number of people getting this disease is growing, rapidly, even if the true figures are not reported. As I can personally report, it is not a fun experience. Add financial stress to that situation and the chance that social breakdown might occur is high.
The day will come when Sunak will greatly regret his failure to have made at least some payments on account to those who are now dependent upon his support schemes. The cost of any errors that might have arisen would have been small compared to those that might emerge.
This crisis has a long time to run as yet.
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Nicely put.
Sunak is being setup to take the big seat. The disaster is going to create a political backlash when the public mood catches up with the massive mess the Govt response has been. My expectation is Bojo will then have the blame tied around his neck and he will be pitched overboard. Sunak is being positioned to take over. The fact he is being talked up by the media including the centre left like the Guardian is notable. The usual propaganda exercise to shape public opinion.
Why do the self employed have to wait till June???
Like you say, lots of people will run out of money long before then.
Is it because it will take that long to process all the claims?
Universal Credit applications have gone through the roof and the system can’t cope.
Won’t it be the same problems with getting bridging loans as well, with huge volumes of applications to process?!
What exactly is the process for the self employed to get the support? Where do they have to apply? Or does HMRC look at all the records and then contact people themselves?
It exposes the callousness of the benefits system for all to see. It’s like people are being punished for losing their jobs. Isn’t Government supposed to be there to support people after all? Clearly not! I hope people realise this and remember when we are out the other side.
Sunak is living in a different world.
The Chancellor’s announcement was delivered as if he was a banker, talking over the head of the trader to his accountant. Here is what he actually said:
“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. To qualify, more than half of their income in these periods must come from self-employment. To minimise fraud, only those who are already in self-employment and meet the above conditions will be eligible to apply. HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply. The income support scheme, which is being designed by HMRC from scratch, will cover the three months to May. Grants will be paid in a single lump sum instalment covering all 3 months, and will start to be paid at the beginning of June. Individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational.”
Traders without an accountant, or ready cash should perhaps remain largely on their own.
Sunak not only thinks, but acts and speaks like an apparatchik. Seven days ago he said “This is not a time for ideology and orthodoxy”, but clearly he still believes in his neo-liberal ideology, and is trying above all to ensure it is preserved in aspic and is ready instantly to return in full, with minimum inconvenience. This is his fourth attempt to deliver a Budget in around two weeks, because he started in the wrong place, and cannot adapt with sufficient flexibility to fit the reality which faces him; in the end he is still the limited intellectual prisoner of his ideology.
Agreed. Well put.
You are right – the tories do not care, and they have not changed their spots. They think like rich people. If they have it so other people must have the cash and it is easy to wait a couple of months. They think people who claimed the benefits or wage scheme are just scum and should be punish by waiting 3 months or 5 weeks if they don’t have their own cash. They are not in the real world and live accordingly to their own morals, so when they announce a few billion here or there it is like a great gift they have done. Wow let’s all clap like seals, as the media does. Pitchforks are cominng and so are the riots.
Like all of us who read this blog and occasionally comment , I have been thinking about the twin issues of the government’s response to the virus itself and the economic fallout as well as managing my own small business in the hospitality sector which is going to take a massive hit this year to which I reconciled myself two weeks ago. And the question that’s been exercising my mind over the last couple of days is ‘ Will the dominant power dynamic that is Neo-liberalism survive the pandemic ? ‘ If you look across the Atlantic you see a combination of an ignoramus of a president and a congress hell bent on bailing out corporations across all sectors with only crumbs for the ordinary citizen. Unless and until that is things get ugly and in a country with a gun culture they could get very ugly indeed.
Rishi Sunak education and career before he became a politician – Goldman Sachs and a hedge fund manager do not equip him to deal with the realities of people at the grass roots level ; in other words the majority. So whilst politically he and his party feel compelled to come up with measures to address the financial hardship brought about by pandemic his understanding of the reality of it for ordinary people is lacking and his intimate connection to the world of finance capitalism undoubtedly drives him to aim to maintain the status quo ante. That tension is to my mind the heart of the matter economically.
A couple of thoughts, for what they’re worth…
A fundamental problem (from which others flow) with the UC ‘safety net’, and the Coronavirus ‘additions’, is that they are top-ups paid (as long as they are really needed – something always queried) in arrears – the great thing about UBI (including UBS) is that it resolves this, as a ‘launch pad’ base, paid in advance.
And, getting back to the immediate Coroanvirus shutdown issue, perhaps what should have been done (maybe might still be done) is for the Banks to have been directed to extend/offer ‘Coronavirus Disruption’ (extra) loans/overdraft facilities – government backed and interest free ‘for the duration’, and with terms to avoid the other problems that have been mentioned – to all businesses below a certain size (above which other options should be available) – with a promise that grant systems to cover keeping people on the payroll, compensating for loss of income, etc. would be developed to repay much, and a generous, long term repayment (maybe 25 year share of of profits after ‘the duration’?), for the rest.
But for now, RIchard (and others), the important thing is to get and stay well, so best wishes
Just a thought to add to your point about banks. The government still has a 62% stake in RBS so why not take it over completely by invoking emergency powers and turn it into a national bank to deal with all matter relating to this crisis .
My thought was that the Government has – or could rapidly gain – power to direct the banks to do that (‘… or else’) without necessarily nationalizing them (is there a British equivalent to the American Defense Production Act?). And that as businesses all (or virtually all) have bank accounts, there wouldn’t be any need to set up an instant new payment system. And the later establishment of grants, etc. would let them be thought through.
But it would take a great deal of time
And the error rate plays duplications would be very high
Why don’t they just give everyone, the unemployed, self employed and those currently on benefits a universal living wage? Less bureaucratic and easier to administer. May be less expensive in the long run.
Because right now they don’t know who ‘everyone’ is
This is a longer term issue
Richard, thanks for attempting to shape perceptions regarding help for the self employed. Such a shame that HMRC, DWP, Cabinet office and HMT are culturally control freaks and lack the skills and staff. Like you hugely disappointed that it is for many too little too late.
One small point regarding your proposal any self employed person using an accountant for self assessment meant that HMRC could easily have obtained the banking details data on each person as accountants would know. Having accountants update a simple spreadsheet from which a competent developer can produce a file HMRC back office payment systems could use would have been straightforward. There is in my view still time to do this. Even paying via accountants would have been feasible too. On the issue of those self employed using the Construction Industry Scheme run by HMRC something similar via employers they used last would have been possible with a few checks since they too have the self employed bank details. I know some payment errors and fraud would have occurred but tolerable given the circumstances.
Why would accountants know?
I don’t think I have ever collected such information on clients as a matter of routine. With a client who only had a current account we’d not usually need it
And most accountants are not permitted to handle client money, for very good reason….
I’m pretty sure I have never given my accountant my bank details?
They have given me theirs though!!!!! On their invoice!!!!
They submit my tax return for me but HMRC contact me direct for payment of the tax due and I pay it on line.
That’s completely normal
I would say most, but certainly not all self employed people hand their business or personal bank statements to their accountant to prepare the accounts. If you take a copy of the year end bank statement when reconciling the bank then you will have a record of many self employed people’s bank account numbers.
It would still be quite an admin exercise to pull the list together, but to save clients a couple of months of waiting it might be worthwhile.
You might…
Bout as you say, that hardly means its logged in once place
True Adam.
Yes I guess the accountant must have it somewhere.
I’m not sure anyone there will be working though?