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  • Hascombes

3 million left to fend for themselves for 112 days and counting...

Updated: Jan 23, 2021

Hascombes Business Consultants Insights

Periodically we find ourselves having to juggle our finances to cover a shortfall in income. I often help businesses identify the avoidable costs and it’s normally a fairly straight forward process – ‘it’s what you spend, not what you earn’ is a reminder from my Father years ago that rings in my head a I forensically look over a P&L. It’s often surprising how easy it is to cut costs without needing to cut staff or undermine the smooth running of a department or business.

But what about 10 days of no income? What about a month, maybe two months? How much cutting back actually counters the immense financial pressure of no income? Now imagine you’ve cut all the costs as a business but you’ve reached the end of drastic measures. What next? Your mortgage, telephone packages, car repayments, insurances? Now think how you might cope with more than 112 days of no income.

112 days ago we got thrust into lockdown and the CV become the overriding crisis that engulfed our lives. At the time, the Government moved quickly to introduce grants, loans, furlough, VAT and tax breaks – and for many, it was not only enabling them to continue trading, it actually boosted the coffers of many business bank accounts allowing some to splurdge on new vans, tools and as I have heard, non-business related items like boats and holidays (!). Yet for nearly 3 million individuals, either through fate of starting a role or trading too late, or perhaps earning a penny over arbitrary thresholds. Maybe it was being registered as a LTD company director and not self-employed – the distinct difference seems to escape most people – whatever the reason, the Government have failed to provide a single penny of support.

Ah, universal credit I hear you say. Well, yes. This could be a possibility but those still desperate to hang on to their businesses and who employ many others cannot just walk away. They can’t furlough either as they still need to maintain the duties and obligations of being a company owner, especially if they employ others. UC is therefore not an option for everybody.

The CBIL and BBL (CV Interruption Loan and the Bounce Back Loan) have been helpful and might have staved off immediate collapse. But this is not a fix all antidote either. Many don’t want or cannot undertake more debt (even if it is interest and payment free for the first year). Not everybody is eligible and many have been rejected by multiple banks.

Aren’t they all tax dodgers? I keep reading articles and comments about some of those 3m being unworthy of help because they cheat the system - and it’s simply not true. Many directors employ staff paying their full tax and NI contributions. They collect VAT on behalf of the treasury. They pay their own income and corporation tax. There are a very small number of smaller businesses owners who might benefit from being setup as Ltd rather than self-employed and many will say this is what they were advised by their accountants. The % of contribution is some ways is irrelevant, it’s the fact that people do contribute and many have done so many years. Even if you wanted to calculate the missing 2 or 3% between Ltd and SE, why not adjust the bailout provision accordingly? To do nothing is short-sighted, uncaring and will only serve to make more unemployed and defaulting on loans, mortgages and other financial commitments.

It is already fueling an immense mental health crisis and it guaranteed to increase homelessness and suicide. It is this serious.

Groups have sprung up and many are garnering support from MPs and high-profile sympathisers but still the Government is holding fast. It still looks like no help is coming. Each time the government are asked to comment on the issue, it forgets the ‘nobody will be left behind’ mantra spouted by Rishi Sunak at the Downing Street lectern many months ago, and instead opts for ‘we’ve wrapped our arms around businesses’. The PM even suggested in Parliament that ‘every company has had £20,000’. I can confirm, this is certainly not the case. We also read and hear that ‘it’s too complicated [to work out]’. I am certain interns at HMRC given enough time could have worked out this ‘conundrum’ – certainly given 112 days to do so.

The easing of lockdown will benefit some. But as we are hearing today, the death rate from CV into the winter has been mooted at 120,000 as a worst-case scenario (the same was said of the 40,000 poor souls who have died since the spring). This worrying outlook will not only increase the risk of illness from CV, it also heightens the tension and stress already at critical levels. We are only a few short months away from switching our heating back on and wearing a coat outdoors. If what we are hearing is correct, the worst is yet to come.

Whether you follow the fairness, parity or moral arguments, the gross waste of allowing these lives and businesses to be destroyed is heart breaking. One thing is clear, unless some of the 3million get the much-needed support we are going to see more of the avoidable consequences of this government in-action.

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