The self-employed have never been more crucial to the UK economy – let’s support them
Tom Purvis, Political and Economic Advisor at IPSE, responds to Peter Dowd’s article acknowledging the crucial importance of the self-employed for the UK economy.
Since 2001 the number of self-employed people has increased by 47 per cent, meaning they now represent over 15 per cent of the total labour force. It is impossible, therefore, to talk about the economy without discussing the central role that the self-employed play in driving economic growth.
The self-employed produce £255bn of goods and services every year - enough to fund the NHS twice over. That’s why we welcome Peter Dowd’s acknowledgement that the self-employed are fundamental to the success of the UK economy.
After the Government’s attempt to increase National Insurance Contributions (NICs) rates for the self-employed at the Budget in March, it is understandable that some are concerned about the prospect of possible tax rises in November.
IPSE worked incredibly hard to warn the Government of the damaging results an increase to Class 4 NICs would have had on our vibrant, dynamic self-employed workforce. And that’s why we were delighted when they heeded these warnings and made a very sensible decision in reversing the proposal. How we tax different forms of work is an issue that needs to be dealt with, but increasing Class 4 NICs is not the way to do it.
Any attempts to address the current taxation of self-employment have unfairly targeted the individual rather than the client. The tax system is complex and, in its current guise, is based on a traditional employer/employee model. We need a comprehensive consultation so that, as self-employment continues to grow, our tax system more accurately serves the modern and flexible way of work.
Tax isn’t the only issue that needs addressing however, so it is a positive to see a senior Labour figure highlight the role of training and rights in producing a vibrant and flexible economy.
Figures released by the ONS last week showed that output per hour worked in the UK was 15.1 per cent below the average for the rest of the G7 advanced economies. One of the ways to deal with this is ensuring that training provides opportunities for people to upskill.
IPSE advocates incentivising training opportunities for self-employed people as we think it is one of the better ways to deal with the growing productivity problem. We have called for training to become tax deductible, even if it is not in their current field of work. At a time when automation is disrupting markets, this will encourage people to upskill and continue to drive the economy forward.
The rapidly changing labour market is also posing challenges for our legal system. To deal with this, IPSE has called for a statutory definition of self-employment. This will be beneficial to the individual, their client and tribunal judges, as it will provide more certainty and clarity over employment status.
Furthermore, there are certain rights which could be extended to the self-employed to ensure that we incentivise people to take risks and start up their own businesses. Parental rights are the key issue. A large amount of the growth of self-employment can be attributed to new mothers. It is now time to equalise the maternity rights of those that opt to take a risk and go self-employed with those that prefer the certainty of employment.
The UK should be aware of the significant strength of our flexible labour market and the unabated boom in self-employment. But as we negotiate the uncertainty of our exit from the European Union, it is imperative that we create the conditions that will allow the self-employed to flourish and drive our economic growth.