Our new Chancellor stood at the despatch box on 23 November to deliver his first (and last) Autumn Statement. Mr Hammond bullishly spoke about an unemployment level lower than at any time in the past 11 years. Much of this cause for celebration is down to the rise of one group – the self-employed. Numbering 4.8 million, they are responsible for two in five of the jobs created in the past 12 months.
It was therefore an unwelcome surprise for him to say in practically the same breath that the “structural effect of rapidly rising incorporation and self-employment further erode revenues” and is therefore something to be concerned about.
The UK is in many ways defined by its dynamic, flexible labour market. It sets us apart from our European neighbours and keeps the economy agile at a time when we need every competitive advantage. Contrary to some media narratives, most of the growth has been among highly skilled, knowledge-based independent professionals. Since 2011, their numbers swelled from 1.8 to 2.3 million. In contrast, the number of the low-skilled self-employed increased by only around 140,000.
We also know that the motivations for becoming self-employed derive from choice. People want to work this way. Four in five (79 per cent) of IPSE members told us they work for themselves because they get to be their own boss, and more than two-thirds (69 per cent) do so to obtain a better work-life balance. A separate study from the Department for Business, Energy & Industrial Strategy found 84 per cent said overall, life is better in self-employment compared to being an employee.
But these new ways of working, notably the rise of the “gig economy”, have raised questions about what it really means to be self-employed. Political parties of all colours are struggling to catch up with the way people choose to work. Back in 2014, Demos highlighted the “need to create greater certainty over employment status”.
We thought Government was on the right track when it launched a review headed by Julie Deane of the Cambridge Satchel company, but we are still waiting for any of the reviews recommendations to be taken up. For now, there continue to be issues helping the self-employed save for their future, access training to upskill, and preparing our young people for a working life that will likely include periods of self-employment.
Disruptive companies like Uber, Hermes and Deliveroo have used the self-employment model to treat their drivers as contractors, but this is being challenged in the courts. You have to ask – iIs an Uber driver the same as an IT contractor or engineer and should they be treated the same by the government? It’s important that we get clarity on what self-employment really means in order to keep pace with modern business models. In instructing Matthew Taylor, Chief Executive of the Royal Society of Arts, to look at new ways of working, the Prime Minister is admitting that Government hasn’t kept pace with change.
The review will be wide-ranging in scope, considering job security, pay and rights, progression and training and workplace representation. It should clarify the nature of these new forms of work, separating them out from other forms of self-employment if necessary.
However, rather than waiting for the Taylor Review to report back, the Chancellor used the Autumn Statement to decree that from April 2017, the public sector should determine the status of its contract workforce. If as expected, public sector bodies consider large numbers of contractors to be closer to employees and taxing accordingly they should expect the contracting community to fight back. Not least because it won’t be offering these workers the holiday pay and pension rights employees receive.
If we imagine the UK in five years’ time, it will have in all likelihood left the EU and will be seeking to redefine itself on an international stage. Our greatest advantage is our flexibility, and if trends continue an increasing share of the labour market will be self-employed. The last thing we want to do is put this flexibility at risk. Instead, we need to see Government try and understand and better support this vital component of our economy. It’s our future after all.