Unleashing the self-employed in the new economy

On 26 April, against a backdrop of the looming EU referendum and just three weeks before the Queen’s Speech, the Association of Independent Professionals and the Self Employed (IPSE) held a key event in the public policy calendar for those invested in the growing entrepreneur and self-employed space.

A wide variety of issues were discussed, including taxation, the burden of regulation, the EU referendum, maternity allowances and pensions and provisions for the future.

Conference attendees were introduced to an action packed programme, in what was the first ever IPSE Policy conference, by British broadcaster Sue Lawley OBE. Titled “Unleashing independent professionals and self-employed in the new economy”, the sessions would cover a range of issues, she said, and be informed by expert entrepreneurs as well as the country’s key policy makers.

Lawley began by aligning herself with the audience as someone that was self-employed and a freelancer, she praised the work and impact of IPSE as a voice for this unique and diverse group. She put into context the importance of the debate, stating that the sector “made a total contribution of £109bn to the economy per annum”.

Prime Minister David Cameron set the political context as he delivered a video message in which he recognised the record number of self-employed Britons. He said the Government’s moves to abolish national insurance class 2 contributions, and the £1,000 sharing economy tax break were a determined step to help support this growing labour force.

Turning to a key theme to run throughout the conference, the Prime Minister used the opportunity to stress the important need for the UK to remain in the EU and to embrace the opportunities which it provides.

IPSE chairman James Collings, began an address by thanking the Prime Minster for his message and suggesting his address was recognition of the growing importance of the self-employed to the prosperity of the UK. The self-employed represent 14 per cent of the UK’s workforce he added.

He used the opportunity to speak about the small business commissioner and stressed the right appointment would be crucial in delivering the type of impact needed for small and micro-sized businesses. Finally, he highlighted Julie Deane’s review into the self-employed and called on Government to adopt all the recommendations of the review “without exception”.

The first panel session of the day was on the tax system, boasting a range of experts, the question was posed whether the tax system was suitable and flexible enough for modern working.

Anita Monteith, tax manager at ICAEW said that flexibility can present “too many choices”, which could ultimately lead to complexity. Tax director at the Office of Tax Simplification (OTS) John Whiting said he largely agreed with this, stating “people wanted certainty”.

Speaking on behalf of the civil service Adrian Dixon from HM Revenue & Customs said there was a huge difference between self-employed, freelancers and contractors for instance. This made simplicity difficult and he warned that it could come at a cost to some part of the workforce.

Chris Sanger, global head of tax policy at EY spoke about the application of a single system that accommodated everyone, but echoing Dixon cautioned that this would not likely be fair on everyone.

The panel then discussed OTS proposals that another entity between a limited company and sole trader could be a positive step, with Whiting agreeing with Monteith this could bring further complexity and it would have to be tested to ensure changes had a positive effect.

Global public policy senior manager John Midgley from Intuit QuickBooks said the way technology was changing meant 40 per cent of the US workforce would be self-employed by 2020 and replicated in the UK. This could present serious challenges for HMRC in the UK.

Turning to the Budget, Lawley said making tax digital was a worry due to quarterly reporting. Whiting said while returns every quarter were not in the proposals there were concerns about electronic records and how quickly this would need to be reached.

Whiting stressed it was the right direction of travel while Sanger agreed and said it was “when and not if” technology was embraced. But Sanger said it was important to understand what the system would be and how pre-population could make things easier for business owners.

Midgely said that if the HMRC embraced the financial technology being used by businesses then it could be a very useful transition to make reporting and accounting simpler.

On the perception of the self-employed the audience and conference participants were pleased to hear Dixon state that the self-employed were not viewed with suspicion or presumed to be tax avoiders by HMRC.

Founder and chief executive of the Cambridge Satchel Company Julie Deane OBE was next to address the conference, focusing on her review into the UK’s the self-employed. She said when questioning respondents she had the overwhelming impression that “no one was looking for anything they were not entitled to”, but simply wanted their diversity and the unique challenges faced to be recognised.

Deane spoke about some common themes which came through strongly during the review, including; importance, motivation, diversity, evolution; and equality and fairness.

Turning to her key recommendations she called for better education to prepare young people, accessible advice and support, flexible financial solutions including pensions and mortgages as well as equal treatment. Maternity allowance and adoption allowance should be in line with statutory pay she said, it was unfair and bringing it in line with other tax payers would be an affordable move.

Deane said the Government were not currently looking at the impact of policy on the self-employed and this should be the case routinely across Government. This would allow overly complicated legislation and administration to be addressed she argued.

One key point for Deane was the need for shared workspaces, as she said that libraries could perform a critical role here and did not want to see them closed.

Finishing her address she said while she did not look at tax, she had found that a taxation review of the self-employed was long overdue and needed to happen.

The panel session which followed saw politicians from across the political spectrum debate how the freelance economy could be supported.

John Glen MP, PPS to Sajid Javid first spoke about Deane’s report and said that it was very well received. Glen said that “that some recommendations could be implemented quicker than others”.

SNP member Hannah Bardell said maternity pay was important, along with the cutting of red tape for businesses and these should be taken forward.

Joining the panel was Former Labour MP Doug Henderson, he said that the world of work had fundamentally changed and young people had to be informed there were different ways of making a career.

Bardell agreed as she said flexibility in the education system was critical, with university no longer the only path to work and a successful career.

Turning to the small business commissioner Bardell spoke about a recent trip to Australia when she found out some more about their flagship system. She concluded the UK model needed multiple commissioners and that trust and fear could mean mediation was the best option rather than taking the court route.

Glen said while the small business commissioner was concerned about prompt payment it was also about encouraging culture change. The threat of exposure was important, he added, with the commissioner’s right to name and shame a powerful tool.

Henderson cautioned that if the commissioner was simply used to create a public servant as a PR tool then it would not add value, it needed teeth.

Turning to pensions, Glen said he would be keen to look at the area of pensions and the self-employed as there was currently a lack of understanding. Deane said her review had left her in no doubt that people did not want auto-enrolment for the self-employment sector.

Lawley said that IPSE believed maternity pay should be funded by the Government, Glen said the Government were looking at this carefully and he instinctively was supportive of it.

Glen said broadband speeds was a top issue and conceded that Government efforts on mobile infrastructure were disappointing. He was hopeful community solutions could be found and hinted there may be something in the Queen’s Speech in this area.

Henderson said a tough approach to providers would be a “popular political stance to take”. Bardell cautioned that monopolies were an issue and stated the CMA was working hard to stop the BT / EE merger. She said opportunities were missed in the Enterprise Bill to put forward measures to hold firms to account.

After a question on the self-employed role in major infrastructure projects, Deane said the problems with procurement was a key issue identified in her review. Glen said targets may not be the right move but more had to be done to allow smaller providers to undertake work on major projects.

The conference then turned to perhaps the most contentious issue of the day, Lawley introduced the session on Europe by highlighting IPSE research which had shown a swing towards its members wanting to leave the EU – however the majority still wish to remain. A live poll taking in the views of the audience suggested 61 per cent wanted to remain, with 26 wanting to leave and the remainder undecided. IPSE is remaining neutral throughout the campaign, and is monitoring both sides closely to ensure the self-employed can make an informed decision about what’s best for them and their businesses.

Laura Sandys, chair of the European Movement UK, began her case by stating that 60 per cent of European headquarters were in the UK.

Sandys talked about the progress on the digital single market which would benefit SMEs and service providers in particular. She called on the UK to shape a Europe which supported Britain’s interests and supported the growing number of self-employed.

She concluded by encouraging the audience and the rest of the UK to “stay, shape and influence”.

Paul Scully, Conservative MP for Sutton and Cheam, said the EU’s economic performance was simply not good enough. He said the current trading relationship was unsatisfactory and was critical of the EU in terms of its approach to budget setting.

Leaving the EU would allow the UK to take control of issues such as immigration.

On trade, Lawley said that all the indications were that it would be harmed if the UK were to leave the EU. Scully suggested that free trade zones existed and leaving the single market would not jeopardise this. Sandys argued that there would be negotiations with 160 countries if the UK took the WTO route.

On the current process of trade agreements, Scully said that deals needed all members to agree which was difficult.

Anna Soubry, Minister for Small Business, Industry and Enterprise began her address by saying that the self-employed now numbered 600,000 more than in 2010 but the overall value to the economy was £109bn.

Turning to the Deane review she reflected on the security of being part as a workforce versus the leap to self-employment. Touching on her own experiences Soubry said that being self-employed required huge discipline to pay in to certain pension schemes whilst also managing bills.

The minister said she was open to all suggestions and ideas, maternity pay may be an option if people were willing to pay into it. As well as the Deane review Soubry referenced the work of Angela Knight on micro-businesses which she indicated was also relevant to the IPSE audience.

On tax, Soubry admitted it was often far too complicated, but the quarterly bookkeeping and digital proposals from HMRC would make things much easier.

Soubry said that there were positive improvements in some schools looking at money management and better financial education which could prepare future generations for the rigours of self-employment.

On the small business commissioner, Soubry said their primary function would be looking at late payment. Their ability to publicise bad practice was powerful she argued. However, Lawley suggested that publicising the small breaches would not be so interesting to the public and may not be impactful.

Soubry said that with it being a new appointment, other elements could be added if the position proved successful.

On Europe, Soubry dismissed the idea of in-fighting in the cabinet and said that the atmosphere was actually very good.

The session ended with Soubry being asked by Lawley to perform an impression of former Prime Minister Margaret Thatcher, who was addressed as a “champion of the single market”.

Soubry, in very good spirit, playfully imitated the late prime minister with a line about her famous pullover covered in the flags of EU member states.

The afternoon session, focused primarily on the evolution working, and was introduced by broadcaster Declan Curry.

Curry began a fascinating session by interviewing five independent professionals about what it took to make the leap into self-employment. The panel discussed the stresses involved with financial uncertainty and the need for discipline and financial planning.

They also touched upon late payment and how training and education at a younger age could reduce the difficulties of running one’s own business.

Labour’s Shadow Small Business Minister Bill Esterson said it was “really important to provide a level playing field” for businesses and the self- employed. In a call for action he asked for “collaboration between businesses large and small”.

Turning to the current issues faced by businesses he said that broadband needed to be an “absolute priority”.

He spoke about the “chronic shortage of skills in the country” and called on Government to do more. While he called for more Government contracts to be given to freelancers and small businesses.

“The creation of the small business commissioner is a step in the right direction”, he said but suggested it go further and follow the example in the United States where it looked at levelling the playing field and working better with Government.

On expansion and exports, Esterson made clear “we have to export more” and the internet was an important tool for this. This meant improving broadband infrastructure all the more critical and pressing.

On access to finance, and encouraging banks to lend gain, Esterson said Government needed to encourage banks to look positively at opportunities to invest in businesses with annual turnovers below £2m. Esterson added that alternative finance was out there and a good option, including peer-to-peer lenders.

Concluding his remarks he said: “Give the small business commissioner far greater opportunity to offer support”, to “challenge finance issues and late payment in the public sector as well as the private sector”.

The final panel session of the conference saw IPSE members, academics and attendees take part in a dragons den style session with policy ideas pitched to the expert panel. Suggestions included a freelancer friendly bank account, measures to address freelancers taking up unpaid work, measures on training and a suggestion around co-working and childcare.

To close the conference, the Government’s Self Employment Ambassador David Morris MP provided some concluding thoughts on the importance of the self-employed’s contribution to the UK economy.

Morris said that the Government did not have a legal definition for self-employment, which is a big issue when it comes to devising tailored policies for the sector. He then returned to the importance of remaining in Europe, touching on the potential of trade and expansion to European markets. Finally he stated his hopes of becoming the first minister for the self-employed in the future.

The first IPSE policy conference ended with chief executive Chris Bryce thanking participants and attendees. The packed programme had seen IPSE members updated on Government review recommendations, given an insight into the Government’s direction of travel on live policy issues and provided with commitments across the board to recognise the importance of the self-employed to the economy. The net contribution £109bn per annum was touched on by a number of speakers and the potential for further growth was emphasised as an important target for Government.

PoliticsHome Newsletters

Get the inside track on what MPs and Peers are talking about. Sign up to The House's morning email for the latest insight and reaction from Parliamentarians, policy-makers and organisations.