Theresa May and Phillip Hammond got themselves into a complete mess in the budget on the issue of taxation and national insurance and benefits for the self-employed.
There are nearly 5 million self-employed people in the UK, up from 3.8 million in 2008. Self-employment has accounted for 80% of the increase in employment over that period.
But the rise of self-employment is part of a wider shift towards low paid, precarious work. The number of women among the self-employed has risen by almost a third. The average self-employed worker earns £11,000, about half the average of the wider workforce.
It is estimated that around 45% of self-employed workers (1.7 million) are currently paid below the National Living Wage. It appears that most of these people are not self-employed by choice, but that a wide range of big companies have sought to organise their labour through various zero-hours and self-employment arrangements to cut labour costs. Some of these arrangements certainly look unlawful.
The combination of low-earnings and poor protection has left a large proportion of our workforce falling through the gap in the safety net. The self-employed miss out on the social security protections that come with direct employment e.g. Statutory Maternity Pay, Paternity Pay, Statutory Sick Pay or Statutory Adoption Pay.
At the other end of this scale are some very highly paid individuals who are using self-employment as a route to avoid paying their fair share of taxes and national insurance contributions. Apart from this small minority who would have been forced to pay their fair whack, who would have complained if the Chancellor had said ‘Technically, I know that taking this action breaks the letter of our manifesto promise, but the current situation is totally unfair.’?
But, he didn’t do that. His budget announcement would have adversely affected low income self-employed people. That’s why he was forced to u-turn the following day.
We need a new settlement for the self-employed. It must meet a number of tests, most importantly, that of Fairness.
Any future proposals must demonstrate fairness as between rights and responsibilities, contributions and benefits, irrespective of employment status.