Self-employed homeowners facing “perfect storm” this winter as plummeting support leaves some surviving on 30 per cent of pre-crisis income
New analysis by Labour shows that some self-employed homeowners face the prospect of a winter on just a third of their pre-crisis income because of the Government’s cuts to self-employment support and withdrawal of vital protections for mortgage-holders.
Labour’s Shadow Chancellor Anneliese Dodds has described withdrawal of mortgage holidays and the reduction in the level of self-employment grants as creating a “winter perfect storm” and called on the Government to change course.
From November, self-employed people will be able to apply for a third grant under the Self-Employment Income Support Scheme (SEISS) to cover the next three months – but only for 40 per cent of their pre-crisis trading profits: down from 80 per cent for the first grant and 70 per cent for the second. The Resolution Foundation estimates that 17 per cent of self-employed workers – 760,000 people – had no earnings in September.
According to Labour’s analysis, that means a self-employed single homeowner earning profits equivalent to the National Living Wage had an income of £1,254 before the crisis hit. After mortgage costs and council tax were taken into account, they had £854 left for other spending.
That same homeowner will now only get £654 before mortgage costs. Factoring in mortgage payments on top means they could be left with just £254 – 30 per cent – of their pre-crisis income to get through the month.
A self-employed homeowner with a non-working partner and no children will now have to make ends meet on half of their pre-crisis income after mortgage costs.
On 31 October, applications for the mortgage holiday introduced by the Government at the outset of the Covid crisis will end. As more parts of the country head back under localised restrictions, anyone who gets into financial difficulty will no longer be able to apply for a mortgage holiday.
Self-employed homeowners grappling with huge drops of income and mortgage payments face another cliff edge on 31 October, which also marks the end of the ban on repossessions that has protected many mortgage holders through this crisis. Labour wants the Government to extend the application window for mortgage payment holidays and the ban on repossessions for another three months.
The Shadow Chancellor is also calling for the Government to take urgent action to support people who are struggling with their mortgage repayments.
Under current rules, people who need help to cover the cost of interest payments have to wait nine months before they can access the Support for Mortgage Interest Scheme (SMI). Labour is calling on the government to immediately reduce the waiting period for the SMI scheme from 39 weeks to 13 weeks, as the Labour government did at the height of the global financial crisis.
The Chancellor has still done almost nothing for those self-employed people who have been excluded from support from the start.
Anneliese Dodds MP, Labour’s Shadow Chancellor, said:
“Self-employed homeowners are facing a perfect storm because the Government has decided to abandon them just as we head into the winter.
“There’s still time for the Government to stop a bleak winter for Britain’s self-employed workers.
“It must remove the mortgage cliff edge, fix the gaps in its income support schemes and help people defer the cost of interest payments.”