For years, the talk has been about the changing working landscape and the oncoming digital revolution. Over the last few months, it has come as a surge. The former dot-com boom was all about innovation on top of a thriving economy, whereas we may now have digital innovation on top of a receding economy. We hope that is not fully the case. The world of work is definitely changing, businesses are going to close, and the threat of a recession hangs in the air.
The financial crisis of ten years ago ushered in austerity but it also saw an increase in people setting up businesses and work as self-employed. Which is the same thing: when you are self-employed, you are in business. We are going to see further growth in the number of self-employed workers, as people are pushed out to fend for themselves.
As someone who is already in the ranks of the self-employed, let me say to the newcomers that we didn’t all choose to be self-employed. Circumstances dictated it for many of us. But now that we are here, we enjoy the freedoms alongside the precarity that comes with it. I couldn’t go back to employment easily, though self-employment isn’t without risk.
There is no guarantee of work, thus no guarantee of an income. You will find it harder to get a loan and buy a home, if that is your goal. There is no holiday pay. Time between work isn’t a holiday, it is just time you are working looking for work but not earning any revenue. There is no boss to pay into your pension, no sick pay, no death-in-service benefit. No side benefits, nobody will offer you maternity or paternity pay, nobody will cover your pay if you are called up for jury service.
You are your own boss, and you are in business on your own account. You need to use the revenue you generate to pay for these hidden costs. You particularly need to cover your costs between clients. It is expensive and hard work. It is expensive, to be fair to employers, when they employ people. Rights do cost money, and the Tories have always worked hard to reduce those expensive rights – always looking at the cost of everything never looking at its value.
In recent years, for those who haven’t made it to self-employment but instead live for the long-term in the precarious world of temporary work, we have seen the growth of zero-hour contracts. It is a throwback to the dark days of the 1930s and the depression. Margaret Thatcher legislated such that employees would attain no real employment rights until they had work for an employer for two years. No right for unfair dismissal, no maternity benefits, etc: it was low-rights employment.
Boris Johnson and his pals have decided to move forward both zero-hour contracts and low-rights employment with a new idea – zero-rights employment. It has been specially designed for the self-employed. Under this scheme, to be administered through the off-payroll regulations that were discussed as part of the Finance Bill, the self-employed will be able to carry all the risks of self-employment but pay the taxes of an employee. Companies can bring in staff for the short term, treat them as if they were suppliers but not give them any rights, while the government can tax them as if they were employees. When they are between clients, I understand that the government will consider them to be self-employed and as such they won’t be eligible for unemployment benefits.
It is a scandal and it has passed through its first stages in parliament without even a vote being cast. There were loud voices of protest on the Labour backbenches from informed MPs like Rachel Hopkins and Meg Hillier, who has championed the self-employed in parliament for some time. It was too much for a number of fair minded and free-thinking Conservative MPs such as David Davis too, who tried to move an amendment that could have garnered enough support but unfortunately the bill was passed at second reading by the Commons without division.
This was an issue at the general election, when opposition parties all pledged to review the proposals. Reluctantly, at the eleventh hour, Savid Javid made a similar half-hearted promise. The Conservative’s use of the word ‘review’ was different to what I previously understood the word to mean. All they decided to review was how to implement the proposal, rather than the proposal itself.
The House of Lords, however, did carry out a proper review. The select committee concluded: “It is unfair that contractors within the rules are treated as employees for tax purposes but do not qualify for employment rights, thus creating a class of “zero-rights employees”. The government is replacing one unfairness with another.”
Labour Business has long held the view that the off-payroll tax and the original IR35 legislation needs both review and reform. We set out proposals for doing this in 2016 in our booklet ‘The Freelancing Agenda’ and again last year in our review entitled ‘Taxation of the self-employed’. It doesn’t sound like bedtime reading, but the mess that the taxation and rights issue is keeping the self-employed awake at night. Indeed, the new proposals are a total nightmare.
Clearly, we can’t have a proposition to create an environment where zero-rights employment is legislated for. It would undermine over 100 years of progress by the labour movement. We look forward to seeing this strongly opposed by the new Shadow Business and Shadow Treasury frontbench teams. Anneliese Dodds has in the past been a critic of IR35, so our confidence is high.
Labour Business would be happy to help any MPs receiving correspondence on this issue and any concerned freelancers, and encourage them to stand with us, so that we can make Labour the natural party both of and for the self-employed.