WHO IS EXCLUDED?

AN ESTIMATED 3 MILLION PEOPLE AFFECTED

 

3m_EXCLUDED_TAXPAYERS_V2_FBG

ExcludedUK conducted extensive data analysis May-June 2020 arriving at the conclusion that 3 million taxpayers were excluded from UK Government Covid-19 financial support:

 

  • Self-employed excluded:  1.6 million
  • CJRS excluded – ltd company directors: 710,000
  • CJRS excluded – other employees: 790,000

    TOTAL 3.1 million

This figure is based on detailed analysis of statistics available from the Office for National Statistics, HMRC and the Department for Business, Energy and Industrial Strategy and cross-referenced against all statistics referred to in the Treasury Committee Interim Report of 15 June 2020. The figure of 3 million has been widely referred to by various organisations and commentators, including Martin Lewis (MoneySavingExpert). This figure is also aligned with Standard Life Foundation's findings pointing to 3 million households which they refer to as 'the Unprotected' in their publication of 25 June 2020: How effective are the Coronavirus safety nets? They further note that, as well as missing out on the Income Support Schemes "only 10% of the Unprotected had managed to make a successful claim for Universal Credit".

On 23 October, the National Audit Office published a report, Implementing employment support schemes in response to the COVID-19 pandemic, stating that up to 2.9 million were excluded from the support schemes, again reinforcing the data analysis conducted by ExcludedUK.

Are you ready for the real numbers? 


stats table

Self-employed and SEISS

1.6 million self-employed have been excluded as follows:

1. Newly Self-employed
  • HMRC identified 3.4m potentially eligible for SEISS, based on information held from their self-assessment returns for tax years 2016-17, 2017-18 and 2018-19 and were invited to claim
  •  This would exclude the newly self-employed who began self-employment in tax year 2019-2020. ONS Annual
    Population Survey shows there were 150k newly self-employed in the first 9 months of 2019-2020 which would
    gross up to ~200k over the whole year
  • According to ONS data, 3% of all self-employed in the UK have become self-employed since April 2019, as
    stated in TSC report of 15 June 2020, suggesting a figure of ~150k newly self-employed. However the report goes on to refer to IFS which estimates those ineligible for support to be much higher, quoting “…between 2014–15
    and 2015–16 (the most recent years for which tax data is available), there were 650k sole traders starting up”
  • According to the National Audit Office, HMRC estimated this figure to be 200k
  • We therefore assume this figure to be 200k

2. Self-employed earning +£50k trading profits
  • Financial journalist Paul Lewis reported that HMRC had told him this group amounted to 230k
    http://paullewismoney.blogspot.com/2020/03/self-employed-coronavirus-scheme.html
  • According to TSC report of 15 June 2020, IFS estimated 225k are ineligible for support under SEISS due to trading profits from self-employment of +£50k pa (Source: “Fast choices by government provide generous income support to most workers, but leave some with nothing and others with too much”, Institute for Fiscal Studies, 2 April 2020)
  • According to the National Audit Office, HMRC estimated 200k had earnings above the £50k cap

3. Those earning less than 50% income from self-employment
  • Financial journalist Paul Lewis reported that HMRC had told him this group amounted to 1.75m:
    http://paullewismoney.blogspot.com/2020/03/self-employed-coronavirus-scheme.html
  • However, we know the total ineligible self-employed is 1.6 million, therefore deducting 200k newly self-employed, 225k with +£50k trading profits gives a figure of 1.175m
  • This group includes many unfair exemptions eg. income from pensions, redundancy, property rental, a PAYE
    job. Furthermore, many in the early stages of self-employment do not make much profit – they are surviving
    based on such additional sources of income and are thus excluded
  • According to the National Audit Office, HMRC estimated 1.4 million had earned less than 50% of their earnings from self-employment

Employees and CJRS

  • 6.4m people are on furlough in UK (Source – Treasury, 11 June 2020)

https://www.gov.uk/government/news/figures-show-uk-government-supporting-incomes-across-allnationsduring-coronavirus 

1. New Starters

  • Employees who were between jobs ie. were not on payroll on 19 March
  • People due to start a new job after 19 March whose new employers could not furlough them
  • According to the TSC report of 15 June 2020, ONS figures for 2019 state ~1 million people “started being employed each quarter having not been employed before, with a further 800,000 moving from one job to another”. On this basis, for a 1 month period, this equates to a total of 600k. However, we have estimated this down to 300k, on the following basis
  • There are 3 main employment statuses for employees:
      • Employed
      • Unemployed (we are assuming that those unemployed are claiming benefits eg. JSA but those inactive are not)
      • Inactive
  • Q4 2019 statistics for Labour market flows (seasonally adjusted):
    • Gross Employment Outflow – 807K
      • Employment to unemployment 298k
      • Employment to inactivity – 509k
    • Employment Gross Inflow – 1,008k

So should we just assume 1.8 million move between jobs per quarter and then assume that is roughly 600k per month? There are a few caveats which we have taken into account in rounding this figure down to 300k:

  • Employment to unemployment 298k If these people are claiming unemployment benefits then they would be receiving JSA and would presumably be ineligible for CJRS, hence, not included in ExcludedUK’s total figure
  • Employment to inactivity 509k
    There are several different reasons why people would be included in this figure
    • Dismissals and redundancies
    • Resignations
    • Family or personal reasons
    • Other reasons
  • If someone was made redundant on 1 February, had received a redundancy payment and they did not have a new job to go to on 15 March, they are not actually a New Starter 
  • If they did not have a new job to go to or fall into the grey area of those made redundant at this time, they might be included in the Denied Furlough category
  • Employment to inflow 1008k
    There are various different outcomes here too for someone joining in Q1 eg:
      • Someone joined a company and carried on working
      • Someone joined a company and was able to be furloughed
      • Someone joined a company and was refused Furlough (New Starter or Denied Furlough categories?)
      • Someone was no longer able to take up the new job (New Starter)

    Again, it depends what assumption we want to make, but it will not be the case that all 1 million people who were meant to be joining companies in Q1 were denied CJRS and therefore New Starters.
  • One could argue the various assumptions to create a higher or lower number. However, one of the reasons we have been more cautious here and rounded down is due to the fact that we are working more with assumptions than actual data. Even if we considered New Starters to be in the region of 300-600k or similar, the overall total remains in the region of 3 million
2. Denied Furlough
  • Employees who worked for companies that refused to furlough them eg. those on zero hours contracts, single parents having to look after their children due to schools being closed but could not be furloughed so took unpaid leave, those having to shield
  • ONS employment data for June 2020 shows a reduction of 612k employees paid by an RTI event between March-May 2020 ie. 612k reduction even when employer is not obligated to pay anything
  • If an employee was furloughed, they would still be showing up on the RTI data. These are therefore people who have not been able to receive CJRS
  • We have assumed 100k ie. the employer has just refused, for whatever reason, to furlough them
3. PAYE Freelancers
  • These are freelancers who are forced to work as PAYE but then in many cases their employers refused to furlough them (eg. BBC; significant numbers in construction and creative industries)
  • This is a large and varied group and how they are counted in the figures depends on the proportion of income from PAYE vs self-employment.
  • There are 3 different scenarios:
    • If paid 100% via PAYE, they would not be eligible for SEISS and would therefore be part of the 1.6m excluded - they could try to claim CJRS, but in many cases their employers have refused to furlough them
    • If paid via a mix of PAYE and self-employment but total income was less than 50% from self-employment, they would not be eligible for SEISS and would therefore be part of the 1.6m excluded
    • If paid via a mix of PAYE and self-employment but total income was more than 50% from self-employment, they would be eligible for SEISS (therefore be part of the 3.4m included)
  • In TSC report of 15 June 2020, ONS data for 2019 is quoted stating, “15.6% of self-employed people categorised themselves as ‘freelance’ or ‘agency’. Among +5 million self-employed, we estimate that around 780k people in this group could be freelancers”
  • We have assumed a 50 / 50 split of the total 780k:
  • 390k have been included as PAYE Freelancers on the 100% PAYE side
  • 390k have been included on the less than 50% self-employed SEISS side (part of those ineligible due to the 50% rule ie. 390k out of estimated 1.175m)
4. Ltd Company Directors
  • This is a group for which there is significant confusion over whether they are technically self-employed or not. They operate in a manner which is akin to being self-employed but are excluded from SEISS. SEISS is based on ‘earned’ income and therefore this group, who pay themselves primarily via dividends (or what would be classed as repayments towards of a director’s loan when not in profit) along with a smaller portion as a PAYE salary, are excluded
  • While they have access to CJRS for their PAYE salary, 80% of this is typically £575/month. However, many simply cannot furlough themselves, for fear of losing their business, or can only furlough themselves in a limited capacity thus receiving considerably less support. We therefore consider this group to be excluded, in line with TSC report
  • ONS figure is 715k (October 2019)
  • IPSE referred to a figure of 710k as quoted in the TSC report of 15 June 2020. There will have been some unaffected, while there will be some small limited companies with more than one director excluded, we consider this to cancel out and therefore have gone on the basis of the Treasury Committee report

 

Maternity, Parental and Adoption Leave

The following information is based primarily on statistics provided in the House of Commons Petitions Committee report (6 July 2020) which recommended extending support by an extra 13 weeks ie. 33% of maternity leave.

References:

House of Commons Petitions Committee report:

https://publications.parliament.uk/pa/cm5801/cmselect/cmpetitions/526/526.pdf?fbclid=IwAR3O8V198ix4b4qFpfDdPS42zEcwhGvlVOKfp7kTUZJJ_9cvG81vpw4eIBQ

ONS:

https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/datasets/vitalstatisticspopulationandhealthreferencetables

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/timeseries/lf25/lms

 

Statutory Maternity Pay (SMP)?

Paid for up to 39 weeks. Employees receive:

  • 90% of their average weekly earnings (before tax) for the first 6 weeks
  • £151.20 or 90% of their average weekly earnings (whichever is lower) for the next 33 weeks

To qualify for SMP they must:

  • earn on average at least £120 a week, have worked for their employer continuously for at least 26 weeks continuing into the ‘qualifying week’ - the 15th week before the expected week of childbirth

How much is spent on SMP normally:

  • Annual cost – £2.55 million (source: Department of Work and Pensions)

What is extra cost called for:

  • House of Commons Petitions Committee report (6 July 2020) recommends extending support by an extra 13 weeks ie. 33%)
  • Taking 33% of the current annual bill (£2.55bn) gives an additional £850 million

Extra cost per person:

  • SMP cost per week of 151.20 x 13 extra weeks = £1,965.60 per person

How many people would therefore be affected?

Taking the £850 million total and dividing by £1,965 per person = 432,438 people

Number of births in the UK each year: ~730k (source: ONS)

Percentage of women in paid employment: ~72% (source: ONS)

 

So, as an approximate check, that would give 525k women per year who:

  1. gave birth and
  2. are in paid employment

Therefore, the 432k estimate of those potentially affected, as per the House of Commons Petitions Committee report appears to be within the right ballpark.

 

Where would these mothers fit within the current Excluded numbers?

This is more difficult to say as SMP is statutory and applies across all use cases below. The 432k mothers could potentially fit any of these use cases on the employee side:

  • Have been furloughed by their employer (obviously these are not counted as part of the 3 million excluded figure). However, some mothers have had to end their maternity leave in order to go on furlough
  • Denied furlough (anecdotally from the House of Commons Petitions Committee report, there seem to be a significant number in this category)
  • New Starters
  • PAYE Freelancers
  • Ltd Co Directors

Therefore, the total of 432k would appear to be about right, but how they are allocated across these various use cases is difficult to assess from primary data sources.

The most likely scenario is that many of them could be in the Denied Furlough category. We could increase our number for Denied Furlough but we do not have an accurate way of judging by how many. Our estimate of 100k for Denied Furlough is only an estimate anyway and it may well be a bit understated.

This is similar to the discussion around freelancers ie. freelancers cut across the various use cases we have outlined for the 3 million.

 

Other statutory entitlements to parental leave and pay

  • Adoption Leave and Pay: based on House of Commons Petitions Committee report – 4,070 (Department of Education states 3,570 adoptions took place in the UK year ending March 2019)
  • Maternity Allowance (SML - for those who do not qualify for SMP which would include the self-employed): based on House of Commons Petitions Committee report – 54,945
  • Shared Parental Leave: this would still fall under SMP and SML figures above
  • Paternity Pay/Leave: 2 weeks and therefore for the purposes of calculating those excluded, this is negligible

Based on the House of Commons Petitions Committee report (6 July 2020) an estimated 491,462 have been affected by maternity, parental and adoption leave in relation to those excluded from UK Government Covid-19 Financial Support, falling across various categories of those excluded, as follows:

maternity table_breakdown-2

 

Conclusion

Total numbers based on our calculations and carefully considered estimates give a total of 3.1 million which we have rounded down to 3 million.

While this total figure of 3 million is an estimate, it is based on all accurate data available and careful consideration of all relevant factors. Whether it is exactly 2.5, 3 or 3.5 million though is not the biggest issue. The issue is the huge number of taxpayers, who have paid into the system for years, in many cases for decades, and yet precisely in their moment of need the Government has excluded them.

 

In ExcludedUK’s press release of 14 June, we called on the Treasury to release their own figures.

 

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