Mersey Reporter - #Merseybites #News

WE are asking all the main parties for comments on these questions we are asking within this feature report...

IN May 2021 the Business & Energy Secretary, Kwasi Kwarteng, said:- "Small businesses are the backbone of our economy" yet we face a worrying future, here in the UK for SMEs and Freelancers. If we lose SMEs and Freelancers, our economy will crash, yet this vital part of economics is being overlooked. Also, SMEs provide many more things to the UK, other than money. Often they offer most of our support services, and cultural services, and also help with other local issues, such as supporting call local community events, more than many international businesses. They help to keep a sense of identity for local communities, keep cash locally and in the UK economy, plus offer the chance for innovation. Some are the potential seed corn for expansion. Yet, many freelancers and small business owners are actually being penalised. All systems appear to write off businesses after 1 year, with the availability of help and support for those who require longer development, being pushed to one side. Prime examples are the tech industries. But, not this short-sighted look at business is also hitting many well-established businesses, which are being hit by the energy crisis and also Covid Loan Repayments, along with increasing wages for the workforce, et cetera.

There appears to be one very big issue being raised, that of Universal Credit, which is actively putting many small businesses at risk. We have had a growing number of businesses contacting us, who are worried about the prospect of going under, due to catch-22 situations they are finding themselves in. Despite this, many will claim to be doing:- "well" or "ok" because they fear being seen as a failure, or are worried that customers will not use them. They are also about staff getting alarmed.

With the pressures of paying back Covid19 Bounce Back Loans, combined with recovering losses, increasing prices, and increasing wages, many small business owners are now no longer able to pay themselves. Often this means the business has to increase borrowing, if that is possible, all of which extends the issue into following years. This combination has led many SME owners onto claiming Universal Credit. But this system, itself, is now trapping business owners into a catch-22. A good example of this is the following scenario...

To gain Universal Credit, in its current form, you must be receiving a minimum income, under the:- "Minimum Income Floor." However, small and medium business owners are telling us that they are increasingly facing pressure to find alternative jobs, which may increase their income. These jobs may well be temporary, inappropriate for that person, even 0 hours, low pay work, that is an unreliable source of income, just to meet the requirements. These jobs will be identified by so-called:- "Work Coaches" and the Department for Work and Pensions. To refuse to take on a job means losing your entitlement to benefits. But, of course, this usually means you are unable to work any longer on your own enterprise. This undermines your efforts to sustain your own business, which will probably collapse, losing all the time and money you have invested. This is just because it still requires extra support to nurturing to bring it into full production, which could lead to greater opportunities for the nation at a later stage.

Seemingly, one person, you, is now gainfully employed, however temporary. However, if you have employed staff, with the demise of your business, they now become unemployed. At best 1 in 1 out, probably 1 in + 2 or more out, what is the gain here?

Furthermore, for the business owner, there are other serious implications; if you employ staff, you have to work around the UK's:- 'Statutory Guarantee Pay' and if you lay staff off, you have to give:- 'Severance Pay,' no matter what income your business has or what your business has in reserve. That means the business must give compensation for laying off workers, even if this means the firm goes under, as a result of having to give:- 'Severance Pay.' This is an even bigger issue if the employer is a freelance, as this can make the business owner personally bankrupt, the other problem with layoffs is the effect it has on the local economy. Even if the business can survive and pay to lose a member of staff, to get a short-term gain, they have lost valued and loyal staff, who are often trained, in a world where it is increasingly hard to get good staff. Often owners of SMEs are faced with losing a member of staff or less pay to themselves.

If they lose pay to themselves, leads to a vicious circle, they often have to apply for Universal Credit, bank loans, and... But even if you apply, unlike Tax Credits, you still face not getting any help. For many SME owners and Freelancers, one of the biggest issues of Universal Credit is the:- "Minimum Income Floor." and the fact that those on the system are being pushed onto having to take on extra work, due to having to go to so-called:- "Work Coaches" and the Department for Work and Pensions. Plus, having to submit monthly basic earnings, any ad hoc or temporary pay, housing allowance, etc to the:- "Work Coach." Plus, being forced to apply and go to job interviews! This has a massive impact, as not only does it take up time, and money from the business, but also it is a major issue for the staff the business is employing. It makes them feel insecure if they hear the boss is applying for jobs! Has anyone coasted the concomitant mental health issues involved? The stresses on all affected will surely place great pressure on our already overloaded health care services. Is there anyone taking an overview of the greater costs of these apparent small gains in multiple areas, both economically and socially?

Tax credits, for all their faults, were far simpler and worked far better for freelancers and in situations where people have a few years of issues when trying to get businesses back on track. Not all viable businesses can be put back on track within a year. This is especially relevant where businesses are in down-the-chain situations, suppliers to primary manufacturing, and face-to-face services, which need to re-establish themselves before they fully utilize the secondary industries. If the secondary industries are not supported, pro tem, and go under, there will be serious ramifications for the primary sector.

The benefit situation appears to be getting worse, and the introduction of the setting up a:- 'Job Centre League Table,' which will give £250 bonuses to DWP staff who get the most people into work, will surely create issues and misunderstandings down the line. As if that was not an issue, if you earn less than the Minimum Income Floor, Universal Credit will not make up the difference. Plus the Minimum Income Floor is only applied for up to 12 months if you are newly gainfully self-employed, so this will hit many who are using Universal Credit.

Not only that, many self-employed business owners are struggling to get any form of pension.

Often they can not afford to pay NI and have to opt-out. This is stoking up a crisis for the future and putting many SMEs at risk. Plus, if they go bankrupt, they stand to lose their pensions, if they have any!

The big question we are being asked is why a business that is struggling to pay the owner but is paying staff, should go under, for the cost of a small top-up each month. For example, if a business pays 3 members of staff, would it not be more sensible or pay Universal Credit to help the SME to grow and not put the:- "Minimum Income Floor" on them if they are paying staff? Many SME Owners are asking why it makes no sense to push a business under, and put more on the job market than paying a small amount to a business owner, who is trying to develop a business.

This issue is increasingly disproportionately penalising the likes of the Arts and Media industry. where income levels fluctuate wildly. This is then leading to a lack of qualified, experienced people within this sector. But we are also hearing:- "Work Coaches" are also telling employed care workers and those within other sectors of the support industry, such as cleaners, that they must get new jobs or lose their Universal Credit claims, This is resulting in more calls for wages to increase, and the cycle going around and around.

Please can you comment on this situation and why Universal Credit claimants are having a very hard time facing unrealistic and completely unjustified hurdles, to get help? We know that some of our readers have been told to take 0-hour contracts and that if they do this, the employer requires them to work whenever they want them, Sounds good, but in reality if they don't get work from this employer they have to start the who process off again, and if they continue as a business owner, how can they do that job and run a business?

Are you going to call for protections against bankruptcy for self-employed business owners and freelancers from the issues raised above? Also, can you guarantee that Universal Credit bonuses will not be used in a way that affects the already growing number of self-employed business owners and freelancers in difficulties? Also, why does the Government feel that it is required to use "Work Coaches" who often do not know anything about the business sector to close businesses that do more good for the community than the closure of them would? Also, in addition, will you call for the review of the:- 'Minimum Income Floor' that is a major obstacle for businesses that are trying to hold their heads above the water? The last question is, why set a 1-year rule when many businesses have been hugely hampered by current events? Is this 1-year rule destroying innovation and also the entrepreneurial side of the UK's economy for short-term gains? If not, how is it helping?

The new budget sounds good, but there is yet again very little if any thought for self-employed and small businesses, to encourage enterprise and enable long-term development of grass root UK businesses. It is all well and good to give Tax cuts on the buying of computer equipment, but if you can't afford to keep the light on. How will that help small businesses take off? Would you set up a small business?

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