Unemployment to soar after Chancellor delays coronavirus help for self-employed until June

Rishi Sunak accused of leaving self-employed 'high and dry' and pushing families into poverty

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Unemployment will soar after the Chancellor delayed a coronavirus bailout for millions of self-employed people until June, the Government was warned on Thursday night.

Announcing a £9 billion package for self-employed workers, Rishi Sunak acknowledged that millions will have to claim welfare until the summer if they have no other money to live on.

The Chancellor also put the self-employed on notice that they will have to pay more tax in the long term to help pay for the bailout, described by one freelancers' trade body as the "kicker" that could finish off start-ups even if they get through the coronavirus crisis.

It came as, in the US, the number of people applying for employment benefit after losing their jobs rose to five times higher than at any other time in the country's history (see graph below). 

Asked whether he was concerned at how much of the economy will be left after the coronavirus pandemic, Mr Sunak said: "I have seen the numbers  from the US and also from here, and of course they are very very worrying. These are people's livelihoods, their jobs, their financial security, which is now being severely damaged.

"This is going to be a very challenging few weeks and months – there is no doubt about that.

"I absolutely acknowledge this is going to be challenging. People's lives and livelihoods are going to be impacted, but I do believe the measures we have put in place will make an enormous difference to alleviate that hardship."  

Mr Sunak said his bailout for the self-employed would cover 80 per cent of someone's average monthly profits up to £2,500 per month.

Out of more than five million self-employed people, the Treasury expects 1.7 million to be ineligible for the scheme because they earn less than half their income from self-employment, and 200,000 people are not eligible because they have profits exceeding the £50,000 threshold.

Those who have become newly self-employed will also be ineligible, as they must have a tax return for 2019. Mr Sunak has admitted that he would not be able to "save every job".

It came as the number of people who have died after testing positive for coronavirus in the UK rose to 578, with 11,658 people so far testing positive.

There was good news, however, as the Government raised the target for volunteers to help vulnerable people through the coronavirus crisis to 750,000 after almost 650,000 members of the public signed up to help the NHS.

Boris Johnson, as well as Prince George, Princess Charlotte and Prince Louis, were among millions of people who stood at their doors to clap their appreciation for NHS workers on Thursday night as the nation came together to show its thanks.

The UK's deputy chief medical officer also suggested that while restrictions on society could last for six months in some form, there was the prospect of them being eased in the foreseeable future.

Almost half a million people have applied for Universal Credit since the coronavirus outbreak took hold.

The clothing retailer Next became the latest business to succumb to a growing public backlash against firms attempting to stay open, as it shut down its online operation over public complaints about its warehouses being staffed.

Takeaways including McDonald's and Greggs have already shut up shop despite Government advice which said they could stay open.

In a further jolt to the economy, banks called on Thursday night for a suspension of the housing market amid concern over the impact of the virus outbreak on valuations. 

UK Finance, the trade body for the banking and finance industry, wrote to lenders on Thursday asking for "urgent clarification" over the future of the market. 

Mr Sunak's scheme for the self-employed 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 their income in these periods must come from self-employment.

Average monthly payments are expected to be £940 per person, but no money will be paid out until June.

Mr Sunak said the scheme, which will last for at least three months, "is one of the most generous in the world", but made it clear that tax rises for the self-employed are now inevitable.

He said: "I must be honest and point out that, in devising this scheme in response to many calls for support, it is now much harder to justify the inconsistent contributions between people of different employment statuses.

"If we all want to benefit equally from state support, we must all pay in equally in future." He said everyone would be "chipping in together to right the ship afterwards" once the crisis is over.

Matt Dowling, the chief executive and founder of the Freelancer Club, which represents more than 40,000 members and campaigns for freelancers' rights, said hundreds of thousands of people would be forced out of business while they waited for a bailout payment.

He said: "A lot of freelancers are already living on the breadline, living from pay cheque to pay cheque, and I'm sure we're going to see a lot more casualties.

"I think hundreds of thousands of people will be unemployed as a result of this because they have no savings to tide them over, and for people who have just become self-employed there's nothing.

"Paying for all of this in extra tax when the dust settles will be the kicker that finishes some people off, even if they manage to weather the next few months."

Peter Kyle, a Labour MP who sits on the business select committee, said: "We cannot have nearly five million people left high and dry for three months. We're talking days or a couple of weeks for some people before they're out of business.

The Chancellor's announcement came on the same day Government figures revealed that the number of Britons in poverty has reached a record high of 14.5 million Credit: Mike Egerton/PA

"These aren't rich game developers and film directors. These are people who are self-employed cleaners, tradespeople with young families. These are not people who have enough savings to sustain them for months.

"I applaud the scale of  ambition, but it needs better delivery. It cannot wait till June. The principle is entirely correct – but it has to come quicker if it's going to keep food on people's tables."

The Institute for Fiscal Studies said 23 per cent of self-employed workers were in relative poverty, compared with 11 per cent of employees.

It said almost a million self-employed workers – around a fifth of the total – are in sectors hit by large falls in demand, which will mostly shut as a result of social distancing.

Neil Leitch, chief executive of the Early Years Alliance, which represents childminders, said: "Childminders have mortgages, rents, bills and other expenses to pay right now – how, then, can they be expected to wait until the start of June for any financial support, as the government has indicated?