One of the key issues coming out of the recent budget announcement was the Chancellor's decision to raise national insurance contributions for the self-employed. Whilst much of the fuss is political noise rather than rational debate, it once more highlights the growing importance that the self-employed play in our economy.
Many argue that the flexibility of employment law in the UK and the ability for businesses to hire and fire is a key success factor in the UK; for example attracting foreign direct investment in the car industry as well as the high tech world.
Others say that this flexibility hides real employment problems which will lead to genuine and long-lasting social issues; the treatment of people as numbers, with a complete loss of job security and the associated stresses that go with it. Note the recent headlines on Uber, Deliveroo and CitySprint – all companies that rely on the self-employed as a key element of their very successful business models.
The gig economy can be spun both ways, but what is clear is that businesses and the government need to find a fair yet flexible model for the rapidly evolving workplace. This is wider than simply a tax debate.
Commentators have rounded on Philip Hammond for proposing to increase self-employed national insurance contributions to bring them closer to those levied on employees. The timing of the announcement was unfortunate: this is an incremental approach to a problem that requires structural reform. For this reason, Theresa May’s announcement that this move will not be considered by parliament until the autumn makes sense. By this time, we shall also have the Taylor review on employment practice. It is nonetheless remarkable that small reforms to reduce distortions, increase progressivity and protect vulnerable workers have been so roundly denounced. Far from an attack on entrepreneurship, the reforms proposed are small but welcome steps towards tackling longstanding structural problems in the UK tax system and labour markets.