The British Government Extends the Self-Employment Income Support Scheme

Summary

• The government announced the second call for Self-Employment Income Support Scheme (SEISS), just a week after the Office of National Statistics reported that nearly 750,000 jobs had been lost since the imposition of Lockdown in March
• There is an increasing concern among the policymakers that the situation might turn for the worse if there is a resurgence of the pandemic in the winter months, which requires the government to be prepared with a strong support system to support the self-Employed
• Experts, and lobby groups, point out that there are major gaps in the current scheme as it only covers half of the self-employed workers in the country, and the other half will be left to fend for themselves

The British government has decided to extend its Self-Employment Income Support Scheme grants that supported people, not on the rolls of organised businesses in the country. The scheme which reopens on 17 August 2020 will pay claims up to £6,570 for lost income since 14 July 2020. The new scheme which will help many who have not been able to get back on their professions since the earlier version of the scheme ended can be called the much-needed support, given the slow state of recovery many industries are witnessing now. Chancellor Sunak, while making the announcement on the extension, stated that the scheme would protect people and their livelihoods and get back on their feet while the country recovers and things get back to normal. It is worth noting here that the earlier version of the scheme had paid nearly £7.8 billion to as many as 2.7 million people in the month of May and June, just after the lockdown was reopened.

The current state of recovery and jobless-ness in the country

The recovery of the British economy after the reopening of the lockdown in May has been slow and marred with problems. First, despite the economy picking up since the reopening, the unemployment levels in the country still remain at very high levels. The Office of National Statistics (ONS) has revealed that the country has lost as much as three-quarters of a million jobs since the lockdown and it could still get worse if there are impediments in the state of recovery. Second, the state of recovery is also uneven across industries, rousing fears that the initial spurt in business activity levels may not be sustainable. And third and the most critical factor that is hampering the recovery of the economy is the continuing critical state of the pandemic. It has been more than five months now that the virus hit British shores, but despite the all-out efforts made by the NHS and the other agencies of the government, the pandemic continues to increase more and more people in the country. Till now the pandemic has infected nearly 313,500 people and claimed at least 41,366 lives.

The Jobless claims in the country have only been increasing since the lockdown. The furloughing scheme which is supposed to be withdrawn at the end of August this year has attracted ample criticism, as there are several who have not been brought back into active work by their employers and would face certain unemployment. It is estimated that the employment scenario in the country could become much worse after the month of August if no concrete action plan is drawn by the government to tackle the same.

The risk of a resurgence of the pandemic and what it could entail for the economy?

The risk associated with the state of unemployment in the country could far worsen if there is a resurgence of the pandemic in the winter months as is being predicted. Many of the businesses in the country are avoiding a full scale back of their businesses fearing a drop in demand in coming months and fear of an increase in the number of infection levels in the winter months. Should a resurgence happen, it will undo all the recovery that has taken place in the past few months and push the economy into a much deeper recession.

The current version of the scheme if it is able to help at least half of the self-employed people in the country, it will significantly reduce the risk of the overall demand levels from sinking deeper which would translate into a lower number of business failures and lower unemployment levels.

The scheme of implementation

The scheme will benefit only those individuals who have no less than half their annual earnings coming from self-employment and have trading profits of not more than £50,000. The grant given by the government will be equivalent to 70 per cent of the applicant's average monthly profits, for three months and capped to up to £6,750.

However, the Association of Independent Professionals and the Self-Employed (IPSE), a lobby group of self-employed people in the country have pointed out that the above eligibility criteria will only benefit half of the affected. The chief of IPSE Derek Cribb further stated that self- employed people for the kick-starting of the economy form situations like the current one and driving them out of business would only bring much harm to the economy.

The silver lining

The latest updates, however, on the state of the British economy are quite encouraging. Bank of England's chief economist Andy Haldane, on 15 August 2020 had stated that the economy would grow by 20 per cent during the second half of the year. The unemployment levels in the country could hit 7.5 per cent with nearly 2.5 million sitting outside. It is also likely that the much-awaited vaccine against the pandemic will be available by the end of September, which its manufacturers have been promising. Should that schedule be kept, it will be a big confidence boost for the economy. Much of the uncertainty and fear among the people will be alleviated, and they will be able to go back to their day to day businesses as they did before. Till that time at least, there will be a need for the SEISS scheme.