The Changing World of Work

The Government has talked about making open policy-making the default, but we’re yet to see this applied to major Government decisions. Jill Rutter argues that the next wave of open policy-making must instigate a national conversation about our economic future.

The way people work is changing. The old model of lifetime employment broke down some time ago. And now, the concept of “employment” itself seems to be increasingly past its sell-by date.

In the Autumn Statement, the Chancellor gave this as one reason why revenues were coming in under forecast. The tax system treats employed, self-employed and “companies” differently for tax purposes – and that means if people move from being employed, and paying income tax and national insurance contributions, to paying less national insurance, or “incorporating”, the Government can find itself with less revenue than expected.

This is a battleground at the moment. HMRC is pursuing companies who appear to dress employees up as self-employed to reduce their tax bills. Meanwhile, Uber recently lost a court case over the non-employment status of the people who drive for it; the downside of lower taxes for the workers is the loss of employment rights.

Government is responding with a series of reviews. The head of the Royal Society for the Arts (RSA), Matthew Taylor, is reviewing the so-called “gig economy”, looking particularly at the rights held by people active in the new economy. But the Chancellor also promised action by the Treasury, “so the Government will consider how we can ensure that the taxation of different ways of working is fair between different individuals, and sustains the tax-base as the economy undergoes rapid change”.

This is clearly a challenge to the way Government does policy, and tax policy in particular. On the one hand, the Prime Minister commissions a rather ad hoc review (you can only find details on the RSA website, nowhere on the Government’s own website), with no mention of tax in the terms of reference. Then the Chancellor announces a separate exercise focusing on tax.

We have been there before – this is the story of pensions. A big – though rather more official, and better-resourced review of pensions in the 2000s under Lord Turner, led to the introduction of automatic enrolment as a major cross-party consensus initiative – but did not look at tax treatment at all. Then, the incoming Chancellor embarked on a succession of pension reforms, excluding the Department of Work and Pensions from the first of them, just as they were engaged in rolling out the long-incubated policy of automatic enrolment, which was the product of the Turner review.

There are big issues in the future of work, which cut across many Government departments’ responsibilities, and will affect millions of people and most businesses. They cannot be addressed in a siloed way. The whole package – rights, duties, current tax and benefits, future taxes and benefits need to be brought together in one place: to look at how Government needs to adapt its systems to recognise how people want to live and work now, and how we can continue to fund services we need. Whatever happens, there are likely to be winners and losers, and that always makes change difficult.

The changes we are experiencing could present a great test bed for a new approach to policy-making. The Government should set the objectives: those might be fairness in rights and taxation, flexibility to meet people’s aspirations, businesses becoming more competitive, the need to be able to raise taxes in an efficient and equitable way. Then it should enable a national conversation on what that might look like – preparing the ground for long-term consensus reform based on the best evidence.

That would be a radical change. The Treasury has always jealously guarded its prerogative to make tax policy. It has in the past assumed that surprise is the handmaiden of reform and that letting too much light in will cause reform to wither rather than flourish. But that means when reform is politically impossible there is an increasing gap between what the economy needs and what governments can deliver. Closing that gap means being more open – and prepared to make policy in the open.

The civil service reform plan a few years ago talked of open policy-making becoming the default. But that was seen as a change of internal mindset – not a commitment to a different process. Too often that became code for introducing some new techniques – like the policy lab which brings design thinking into Government – or some digital engagement, or using behavioural insights. But mostly applied to policy areas where Ministers did not really care about the results.

The next wave of open policy needs to apply to some of the biggest decisions Government makes – and it needs to be open policy as a process where Government is prepared to think out loud and listen to what it hears.