Labour: Half a million people left in the lurch as grants for the self-employed now worth just two fifths of their usual income

• Support for the self-employed through the SEISS scheme will soon fall to just two fifths of their normal income
• Average self-employed person in arts or hospitality will receive just £450 a month through the scheme even if their industry is shut or affected by Tier 2 or 3 restrictions

• Ministers dismissing the self-employed and leaving them in the lurch by offering this level of support whilst restrictions tighten, warns Labour

The Government announced this week that self-employed people will only be able to access a grant worth just two fifths of their usual monthly incomes, leaving half a million people working in shut or struggling sectors in the lurch, Labour can reveal. New analysis by Labour suggests the average self-employed person working in the arts or hospitality industries will receive just £450 a month through the scheme this winter – half the amount they received a month during the first lockdown – even if their sector is shut or affected by tougher restrictions in a Tier 2 or 3 area.

Under the revised SEISS scheme, self-employed people will be able to apply for a grant worth just 40 per cent of their usual average monthly trading profits, down from 80 per cent offered during the first lockdown. That means those working in sectors where work has significantly reduced or totally dried up would receive just two fifths of their usual monthly income.

During the first lockdown, a self-employed person was eligible for two three-month grants – the first based on 80 per cent of their average monthly trading profit, and the second based on 70 per cent.

The average grant paid to a self-employed person in both the arts and hospitality sectors under the first tranche of the scheme was £2,700, or £900 a month, with this being 80 per cent of their average monthly trading profit of £1,125. But under the scheme’s extension a self-employed person in these industries will receive just two fifths of their usual average monthly trading profit - £450 - despite theatres, live music venues and many bars and pubs being shut leaving them with no hope of working and bringing in income.

That means those working in arts or hospitality will receive, on average, half the amount in self-employed income support from government than they did during the first lockdown – despite ongoing or tightening restrictions.

The Government has maintained that the answer to the income gap facing many people this winter will be the welfare system and topping up with Universal Credit, but for every £1 a self-employed person earns or receives through SEISS, their Universal Credit payment will reduce by 63p. Furthermore, those with partners in work, without children and those who own their home may not receive UC payments that will plug the gap, and those with savings of more than £16k, or with a partner with these savings, will be ineligible.

New analysis by Labour reveals the half a million self-employed people working in struggling sectors being left in the lurch by government:

• 177,000 people working in creative, arts and entertainment activities – including theatres, festivals, live music and events, which are predominantly closed
• 52,000 people working in accommodation and hotels – with tourism and travel one of the hardest hit sectors and fewer people travelling for work
• 83,000 people working in food and beverage services like restaurants and bars which are legally closed in Tier 3 and hit by tough restrictions in Tier 2
• 41,000 people working in motion picture, video and television, sound and music recording – with production having been closed down in many cases by social distancing measures
• 17,000 people working in travel agencies or tour operators, a sector hit especially hard during the crisis
• 18,000 people working in libraries, archives, museums and other cultural activities, with many still closed or operating at significantly reduced capacity
• 3,000 people working in gambling and betting activities
• 97,000 people working in sports activities, amusement and recreation activities, with spectators banned, and team sports affected by social distancing restrictions

Many other self-employed people have been excluded from the scheme altogether, including the newly self-employed and those who usually made over £50k in profit a year – meaning if these people are currently unable to work they will have no income at all.

Ed Miliband MP, Labour’s Shadow Business Secretary said:

“The promise of doing ‘whatever it takes’ to protect workers is a distant memory. Despite public health restrictions tightening and many sectors being shut, Ministers are leaving self-employed people in the lurch.

“Almost half a million self-employed people work in industries either partially or fully closed. They’re in desperately choppy waters with many deeply worried about their future.

“Yet Ministers are taking away their life raft and leaving them to sink or swim. That’s not just callous, but economically wrong. These are our country’s artists and performers, and people in our vibrant tourism, sports, cultural and hospitality sectors.

“The Business Secretary must stand up for them and ensure they are given a fair deal."

Ends

Notes to Editors

• Figures for the number of self-employed people by industry are from the ONS (June 2020).
• Figures for the average SEISS grant claim by industry are on GOV.UK (Table 3).

Background on SEISS scheme

• Self-employed people were able to apply for two taxable grants – applications for the first grant closed on 13 July 2020, and applications for the second grant closed on 19 October 2020. The first grant was worth 80 per cent of their average monthly trading profits and the second was worth 70 per cent of their average monthly trading profits, each time paid out in a single instalment covering three months’ worth of profits and capped at £6,570 in total.
• In October, the Chancellor announced the SEISS would be extended. The extension will provide two taxable grants and will last for six months, from November 2020 to April 2021. Grants will be paid in two lump sum instalments each covering a three-month period. The first grant will cover a three-month period from the start of November until the end of January. It will be worth 20 per cent of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £1,875 in total. The second grant will cover a three-month period from the start of February until the end of April. HMRC will review the level of the second grant and set this in due course.
• Yesterday, the Chancellor announced he would revise this plan and instead offer a grant worth 40 per cent of usual monthly trading profits.
• Further background on GOV.UK.

Calculations of average SEISS payment under scheme extension

• The average three-month grant payment for the arts and hospitality sectors under the first tranche of the scheme was £2,700, based on 80% of a normal monthly profit. From this we can calculate the average monthly profit of a self-employed person in these sectors: (£2,700/80 x 100 = £3,375. Divided by three to find average monthly profit = £1,125)
• Under the new scheme, a worker will be paid 40% of their usual monthly profit (£1,125 x 0.40 = £450).