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Imagine that a year ago Theresa May, then Prime Minister, had made a dramatic announcement about public emergencies – slap bang in the midst of the Brexit turmoil.

On that very day, this site carried her press release confirming that Britain’s date for departure had been postponed until April 12 at the earliest – and that any further extension “would mean participation in the European Parliamentary elections”.

Within a week, Oliver Letwin’s motion to seize control of Commons business had been passed, with three Ministers resigning to vote for it.  Now return to that imaginary statement from the then Prime Minister.

Let’s suppose that she had said that the NHS was switching resources to buy ventilators and surgical masks; that HMRC was preparing to revise its systems to better reach the self-employed, and that the army was taking special measures to keep recruiting stations open in a crisis.

The uproar would have echoed nationwide.  Leave EU would have denounced a Remainer scheme by “Treason May”.  Labour MPs would have said that the NHS move was a plot to starve the service’s front line of resources.

As for the army, Carole Cadwalladr would have written that the whole exercise was a Leaver conspiracy, perhaps funded by Vladimir Putin, to prepare for a military coup.  Some who claim to speak for the self-employed would have said that the new plan’s intention was to draw them, IR35-like, into being treated like employees.

Add to the mix the nation’s propensity to want public money to be spent now, rather than invested for a rainy day, and you will see at once why no such plan was made last year, but has never been made at all.

All this is not a bad way to start thinking about a real world aspect of part of the above – namely, the treatment of the self-employed under the Government’s latest economic package to help counter the Coronavirus crisis.  Those who work for themselves are undoubtedly being treated less generously than those who work for others.

There is a devil’s advocate defence of the rationale behind the Government’s thinking, which we now set out in order ultimately to debunk it.

The case begins with practicalities.  Rishi Sunak’s new Jobs Retention Scheme is focused on firms and employees because these are relatively easy to find.  The data that HMRC holds on them will be up-to-date in most cases.  This is not so with the self-employed, and it’s claimed that the Government doesn’t hold bank accounts for all of them.

If Ministers had stepped up their plans to make tax digital, and sought to push the plan faster on the self-employed, some would indeed have claimed that the whole business was an IR35-type plot.

The Government could reasonably object that some of the very same people who denounce Ministers for imposing too much state intrusion are now denouncing them for not imposing more.  There is an additional practical problem which also becomes a philosophical one.

If a firm tries to cheat the Jobs Retention Scheme by taking the money, claiming that workers have been furloughed, and then quietly insisting that they continue to work, the fraud will be relatively easy to trace.

For example, employees could complain – and ultimately make those complaints public.  But if a self-employed person takes the money and defrauds the system, who is to know?  So there is moral hazard in the taxpayer footing the bill.

The issues of principle stretch wider.  If a firm goes bust and its employees lose their jobs, they will have none to return to when the crisis lifts.  But if a self-employed actor or plasterer or electrician or childminder won’t have to face that problem, some of those close to the Government’s planning say.

Furthermore, Tory MPs suggesting that their self-employed constituents can’t live on expanded Universal Credit – the cornerstone of planned help for them at present – should think through what they’re saying. Labour and Momentum will be taking a note of their names and seats.

And will remind voters, when the time comes, that their local Conservative MP intimated, while the Coronavirus was raging, that Universal Credit isn’t enough to live on.  What’s changed, they will ask?

Now we said above that we would set out this case in order ultimately to dismiss it – and so we shall.  For example, it isn’t convincing to argue that, once the virus abates, the self-employed will simply be able to pick up where they left off.

The actor may find that the theatres take time to get back to full tilt.  The childminder, that families have shifted their childcare habits for good, as they are now used to working from home.

The plasterer, that their former clients have discovered the money-saving joys of renovating and repairing their properties themselves.  And so on.  But the core of the case for putting the self-employed on the same basis as other workers is less theoretical than remorselessly political.

Just as public sector workers lean Labour, so the self-employed lean Conservative.  No wonder Tory MPs are knocking so loudly on the Chancellor’s door.

As for moral hazard, well, it was suspended for the banks during the financial crisis, on the ground that the entire economic system would be imperilled by their collapse.  What was good for the capitalist goose in 2008 must hold good for the workers’ gander in 2020.

Given the scale of the crisis, there is a trade-off between fraud and simplicity.  Ministers have little choice but to baptise voters with a financial hosepipe, even if some of them don’t need the money (or will run off with cash to which they’re not entitled).

In any event, there are simple actions that can help.  The Government is already deferring the next quarter of VAT payments until the end of the financial year.

With the economy contracting at a frightening rate, Ministers have little choice but to delay them further, or write off a proportion of them altogether.  There is no point in giving with one hand through Universal Credit while taking with the other through VAT – or income tax at the standard rate.

Bright Blue argues that the self-employed should get the equivalent of the Maternity Allowance, which is around £150 per week, rather than Statutory Sick Pay, which is £94.25 per week.

It also says that the Government could and should offset the five-week wait for Universal Credit by easing the repayment of advances and paying more of the credit upfront.  That is sensible.  Then there is the coming increase for some in bank overdraft charges.

The Financial Conduct Authority says that seven out of ten people will be better off as a consequence of new rules.  Even on those figures, three out of ten won’t be at this turbulent time.

And since the Authority argues that all those who run up unarranged overdrafts will “be better off and see no change,” the losers will, according to their own logic, be those who have arranged overdrafts.  This is an unreasonable burden on the latter at this or perhaps any time.

As matters stand, some Conservatives will take up arms for the self-employed.  Others will ask: where will this spraying about of taxpayers’ money end?  With “30 years of socialism,” as Thatcherites used to complain?

Tomorrow, ConHome will be writing about the Government’s proposed Emergency Legislation.  There will be no end of calls for sunset clauses, regular Ministerial statements and future Commons votes.  They are a model for checks that should also be applied to the gargantuan but necessary state spending expansion that’s now taking place.

54 comments for: The rights and wrongs of the Government’s treatment of the self-employed

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