Industry warns John McDonnell over gig economy plan

Posted On: 
28th September 2018

Speaking at an event in Liverpool at Labour Party Conference, the Shadow Chancellor said we have to "wake up to the reality of what is going on" in the gig economy.

Credit: 
SME4Labour

At the Small Business Question Time with Ayesha Hazarika, sponsored by IPSE, John McDonnell, the Shadow Chancellor, stated that workers should be protected and have a level of guaranteed hours and security.

When asked what a future Labour government would do for those working in the gig economy, John McDonnell said the current situation was "outrageous" and that "we can’t continue in a society that has such levels of low pay, exploitation and abuse."

Alison McGovern MP, who sits on the Treasury Committee, spoke of the confusion in defining dependent workers, and said that the Taylor Review was a good start but insufficient and could lead to confusion on how workers are defined.

Simon McVicker, Director of Policy and External Affairs at IPSE, warned that a Labour government should not adopt a "catch -all solution" that could hurt genuinely self-employed people and result in fewer flexible work opportunities.  

"Don’t kill the goose that lays the golden egg," he warned.

McVicker said that often 'the gig economy’ is considered synonymous for 'the self-employed' but in fact it only counts for a small proportion of all people in self-employment.

Both him and McGovern called for a statutory definition of self-employment, laid out in legislation.

It, McVicker said, cannot be left to the courts to decide what self-employment is. He said it was time for policy makers to "step-up."

McDonnell spoke of the failure of the Taylor Review to recognise the "collective nature of the issue [of the gig economy]" and said that a future Labour government would extend the role of trade union rights in employment.

McGovern, the Member of Parliament for Wirral South, agreed, adding that in the Taylor Review there was a "glaring omission" for Labour members – trade union involvement.

IR35

Referring to the IR35 tax legislation, McVicker responded to a question to the panel on whether you can have taxation without worker rights. He said it was unfair to tax someone like an employee, but not give them employment rights.

Fellow panel member, Adam Payne, a Reporter from Business Insider, flagged that Class 2 NICs is also an area of concern for SMEs.

Stephen Kinnock MP called for a small business administration, "and a strategy to help them [SMEs] across employment law, taxation, late payment of invoices, access to finance, building skills training."

He said, "we need an active state that is not micromanaging business but giving them an opportunity and platform to get the advice and support they need."

Brexit

Questions to the panel inevitably turned to Brexit, and when asked what Labour would do to help with SMEs specifically in the Brexit process, McDonnell said first of all that it was a "God-awful mess". He then said that if negotiations fall apart, "we will do everything we possibly can to press the Government to preserve protections."

The Shadow Chancellor called upon SMEs and others to "express their fury."

McVicker stated that SMEs and the self-employed feel left out and do not feel "part of this debate."

Alison McGovern agreed saying that it is "definitely the case that their voice is not being heard."

She spoke of Labour’s support for SMEs on Brexit, saying "there are a lot of people in the Labour Party who understand SMEs, who understand freelancers, who are worried about this new economy."

Referring to the vote on the conference floor on Tuesday where the party voted overwhelmingly for a policy that would put a new vote on the table if Theresa May failed to get a deal through Parliament, she said "the view of the Labour membership is clear."

McDonnell said for Labour, "all options were currently on the table."

Late Payments

When asked about the Labour Party’s policy for late payments, withheld payment and non-payment and how Labour can convince SMEs to vote for them, Alison McGovern said one initiative that should be prioritised is working out how to use transparency to demonstrate which companies are managing their cashflow by paying late.

McVicker warned that "it was not just late payment, it’s no payment that is a big problem: 43% freelancers have completed work they never got paid for."

He called on the Small Business Commissioner to be given new powers based on the Australian model, where they can name and shame offending companies and have legislative powers to fine them.

Universal Credit

Answering a question on Universal Credit, McVicker said it is not working for the self-employed, because it does not consider their fluctuating income and causes much "worry and anxiety."

Kinnock was supportive of the continued roll-out of Universal Credit.

He said that the principle of Universal Credit – of simplifying and streamlining the system – was the right one but that the "devil was in the detail" when referring to the problems with implementing the new structure.

Even with the current issues, he said he would not advocate "throwing the baby out with the bathwater" by scrapping Universal Credit.