The current Coronavirus outbreak has left many people in dire straits and although a lot of financial support has been announced, there are still gaps in support for both businesses and individuals.
The news today that almost one million people have applied for Universal Credit in the past fortnight should be a sobering wake-up call for the Chancellor. This figure is ten times the normal amount and shows how people are struggling to make ends meet as the economy suffers.
Myself and my SNP colleagues have been working closely to identify issues, and the remaining measures needed to support those who have fallen through the net. Thank you to all those who have been in contact with me to explain how you're being affected. Your testimony has helped me build a picture of what further action is required.
Leading on this, the SNP's Westminster Business spokesperson, Drew Hendry MP, has now written to the Chancellor to outline the measures he now needs to take.
Read the letter below.
As the coronavirus crisis grows, the detrimental impact on workers and businesses is being felt. This will have an impact right across the economy and the measures you announced earlier this month will help the vast majority of businesses affected.
In welcoming the substantive measures announced, we also recognise that there is ongoing uncertainty around what businesses can and cannot do. We believe more detailed guidance around these schemes for employers would help stimulate confidence.
Many self-employed business owners are also concerned about the impact waiting until June for payments will have on their immediate cash-flow, and we would welcome an update from you on how preparations for these payments is progressing. It is vital too, that you do all that is possible alongside banks to ensure the firms have adequate finance to tide them over.
Then there is the 5% who are not covered by the current support package. I am sure you agree, these people should not be left out in the cold simply because they don’t fit neatly into a particular group. In these trying times, they also need a safety net and directing them to Universal Credit, while others have been offered more generous support, is not enough.
I have included some examples of the issues we have encountered below:
The Furlough Scheme
Businesses are asking for more flexibility around furloughing staff. These are unique times and there are many instances where small firms are faced with the choice between stopping essential activities or going under by trying to pay salaries, without money coming in. In many cases, staff could and are willing to do some critical business maintenance work from home, and it would be welcome it the scheme were changed to allow them to do so.
There are other instances, where employers are nervous about committing to the furlough scheme because they fear losing out at a later date. More clarity is needed if the majority of employees are to benefit from this scheme.
For others, the cost of furloughing workers will cause cashflow difficulties in the short-term, therefore access to finance without personal liability strings attached is vital. I have spoken with the British Business Bank and have had their assurances that lenders are lending without delay, personal guarantees, or unfair interest fees. These assurances are welcome and a strong statement from yourself to reinforce this, would be most welcome and go a long way to stimulate more confidence in these schemes.
We understand that your team has been under considerable pressure to get complex systems in place and at pace and believe that further guidance and strong messages to business will go a long way to giving employers the security they seek.
Workers Employed After 28 February 2020
We would welcome greater support for the workers employed after 28th of February 2020, who have lost their jobs because employers cannot furlough them under the current scheme.
In my own constituency, the tourism sector contributes to over a fifth of our local economy. You will know this is an industry that is well known for scaling up business capacity in March in preparation for the summer season ahead. This means that many of my constituents started new jobs in March and are now left unemployed and without furlough support.
They rightly feel aggrieved, as do thousands of affected workers across all sectors. They have paid their dues like anyone else and I am sure you agree they deserve proper measures to support them through this health emergency. It is not feasible to look to their previous employer for support. Most employers are already struggling. We ask that you find a way to support these workers so they too can benefit from 80% of their income.
The Self-Employed Income Scheme – Newly Self Employed
The Self-Employed Scheme you announced was very welcome, it will put money in the pockets of people who would otherwise be left without income. We would, however, ask that you expedite plans to get support to these families before June. As I am sure you understand, this is just too long a wait for most people.
Regrettably, however, your support package does nothing to help those who have recently become self- employed. We understand the challenges around evidencing finances, but we urge you to look at this again and ask you to widen your scheme to include people who have become self-employed in the last year.
Many of these people put everything on the line to build a new business. They need your support, as do our local economies, to which these businesses contribute a great deal.
Small Business Owners Earning Dividends
As you know, the current tax system is set up in such a way that many small business owners are able to get paid the majority of their income via dividends. Where they are paid PAYE, it tends to be to a much lesser extent, therefore 80% of their PAYE income will not suffice to support their family through the challenging times ahead.
We completely understand the issue you have around accounting for dividends but, again, we ask you to look again at this. People are not looking for a handout, they just need fair support over these difficult months.
Entrepreneur and Self-Employed earning over £50,000
Then there are those, who do not qualify for the scheme because they had profits just over the £50,000 in the last 3 years—whilst, at face value, it would be fair to assume people in this earning bracket are better placed to support themselves, in reality, these people are not immune to the impact of Covid-19 restrictions. We understand you had to cap earning somewhere, but these are exceptional times and many people in this group do not have reserves to cope with the trying weeks and months ahead.
These include the entrepreneurs we have encourage to be risk takers—we’ve asked them to invest, to create and to innovate. Many of them have already reinvested their profits into new ventures and now they are seeing them decimated because of Covid-19.
Universal Credit is not an adequate solution to meet their basic outgoings, even with a mortgage holiday. Therefore, we ask that you revisit this threshold or look favourably on individual cases, where a person can show they don’t have savings to cover this period. None of us want to see support going to people who have reserves to weather the storm, but our experiences on the ground are that there are people exempted from the scheme who are struggling to make ends meet. We would greatly welcome further support for them.
Chancellor, we acknowledge the challenges you and your team have had to deal with and that the support package put in place will help 95% of people. We hope you will similarly recognise the task now to support the remaining 5%—including small businesses and self-employed people currently having to find money to furlough staff until the June payment, and put food on their own family’s table.
It is clear you have worked to help as many people as possible and my SNP colleagues and I are grateful for the support package announced. It will make a difference to those who meet the criteria.
Now we urge you to look at supporting those who do not fall within the groups already supported—either by widening the scope of existing schemes to include these groups or put in place a separate grant scheme for those who don’t fit any of the criteria already set. It seems only fair that they too, should be able to access 80% of their income up to £2,500.
Once again, we know these are challenging times, but we urge you to go a bit further and help those who feel left behind.
Please never hesitate to get in contact—we must all work together to support our communities through COVID-19. I look forward to hearing back from you.
Drew Hendry MP
SNP Business, Energy & Industrial Strategy Spokesperson