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Rishi Sunak's coronavirus support for the self-employed is a gift that could backfire 

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Chancellor Rishi Sunak announced measures to help self-employed people adversely affected by coronavirus

Did Rishi Sunak’s eleventh-hour handout for self-employed people come with a hidden dagger? On Thursday afternoon, the Chancellor finally unveiled his income support scheme for the self-employed, promising that the Government will pay 80pc of their average monthly income over the past three years, worth up to £2,500 a month.

The offer is almost exactly the same as the scheme set up for furloughed workers – and therein lies the rub. 

“If we want to all equally benefit from state support, we must all pay in equally” were Mr Sunak's telling words. He mentioned more than once that there is “currently an inconsistency” between what employed and self-employed people pay in tax.

He said the “very significant tens of billions of pounds” being spent to treat self-employed people the same way as employed people during this time of crisis “throws into light that inconsistency and whether that is fair going forward when we’re all chipping in together to right this ship afterwards”.

There has been little discussion of what exactly will be needed to make up for all this spending once the country defeats coronavirus but, given the tens of billions of pounds of free money that have been handed out, higher taxes for all could well be on the table. And it looks as if the self-employed could well lose some of their special status. 

 

Sound familiar? Philip Hammond unsuccessfully tried to raise National Insurance contributions for self-employed workers by two percentage points when he ran the Exchequer. He was forced into an embarrassing about-turn, as he himself put it, “in light of what has emerged as a clear view among colleagues and a significant section of the public”. That was just three years ago. 

Mr Sunak has deservedly earned the nation’s confidence and respect in recent weeks with his calm demeanour and generous support, but he should remember that a minister’s position is only as strong as the supporters. 

There is a reason that self-employed people are taxed differently from employees on a payroll. Yes, there are perks to being your own boss, but the risks are vast. There is no paid leave for holidays, illness or births. There is no automatic enrolment for pensions – and no employer contributions, which for employees equate to an annual bonus of 3pc. There is no paid notice period, and no guarantee of future income. 

The day-to-day experience of self-employed people is not “fair” and that is why the amount they pay is not equitable. Mr Sunak must remember that. 

The measures announced by the Chancellor will provide welcome relief to many freelancers, who had spent the week before nibbling nails and panic-counting pennies. But at what future cost?