The growth in self-employment and the rise of the ‘gig economy’ was one of the hot topics on the fringe at this year’s Conservative Party conference. Employment Minister Damian Hinds was among those exploring the issue at a joint CIOT/IFS event.
The Changing World of Work – How should government respond to the growth of self-employment and the gig economy? (Conservative Conference event. An audio recording of the event is below.)
The second of this year’s joint CIOT-Institute for Fiscal Studies (IFS) party conference events was held at the Conservative Party conference in Manchester on Monday 2nd October. The debate was chaired by John Preston, CIOT President (left), with panellists Claire Hooper, Chair of CIOT’s Corporation Tax Sub-committee and a partner at EY, Paul Johnson, Director of IFS (centre left), and Minister for Employment Damian Hinds MP (centre right).
Damian Hinds was appointed Minister of State at the Department of Work and Pensions in July 2016, having previously been a minister at the Treasury. Hinds was upbeat about the Conservatives’ record of getting UK employment to a higher level than the USA and UK unemployment to half the rate of the ‘Euro area’. He also highlighted an increased number of disabled people and women working. There is danger that we take this for granted, when it actually comes down to Tory economic management, active investment friendly and active labour market policies, he argued. There is more to do on driving up productivity and increases in real wages will flow from that, he said.
The ‘end of jobs for life’ and the spectre of artificial intelligence raises many policy questions, said the minister. Providing some context around the ‘gig economy’ he said 84 per cent of workers in the UK are employees, the gig economy is not as new as we think (franchises and commission-only roles have existed before) and most people in the gig economy have another job. However, he did speak of the demand for flexible working arrangements as a result, partly, of more people having caring responsibilities now. What has turbo charged the ‘gig economy’, he said is the internet and ‘apps’.
Self-employment and entrepreneurship are not exactly the same thing, he stressed. He said start-up loans and the New Enterprise Allowance are government attempts to help people to make ‘active’ choices on employment and complement the modern economy. Self-employment is a ‘choice’ made by people and it opens up the labour market to new people. The growth in people working for themselves is ‘part of our success story’.
Universal Credit is ‘a huge reform’ and designed around the different ways that people work these days, said Hinds. However he refused to be drawn on his view of the different NICs treatment of self-employed and employed, saying it was a matter for the Treasury. He said the Government would respond formally to the Taylor Review in ‘due course’.
Concluding, he said: “Yes, there has been a growth in self-employment, it is not just a phenomenon in this country, and there are structural reasons for it… there are fiscal issues but it is not all about that, it is also about ways people want to work and technology. Of course, we need to think about rights and responsibilities and we need to make sure there are proper protections and proper help in place and I believe that is what the Government is doing.”
Claire Hooper gave a presentation which showed the tax differential on income earned through employment, self-employment and services provided through a company. She talked about whether there should be a different tax treatment depending upon the form of work and where that line should be drawn – it is currently drawn between employment and self-employment whilst the Taylor Review recommended that Dependent Contractors be taxed at the same level as employees. Hooper talked about how the tax system currently seeks to incentivise entrepreneurship. She said that if there are to be changes, it is important this is done in a way which works in practice with high degrees of compliance, but low burden on businesses and individuals. In this regard she talked about the challenges currently seen with IR35 and discussed a number of different options for change and their advantages and disadvantages. She acknowledged that any changes could create hardship if introduced in one go and that we needed a long term plan possibly with interim steps along the path. Most importantly we need a public debate and better policy making and in this context Claire referenced the CIOT/IFS/IfG Better Budgets Report.
Paul Johnson told how someone earning £40,000 a year would contribute about £4,000 less to the Exchequer by working self-employed rather than as an employee. He said that the growth in incorporation will cost the Treasury £4.5 billion by 2021-22. The Government’s policy goal of having different NICs between the employed and the self-employed is not clear, he added. He felt that the difference in risks associated with someone running their own business did not in itself justify different tax treatment. Johnson is in favour of aligning marginal rates of NICs as long as it does not distort investment in businesses. Employee rights are a transfer from employers to their employees and not a benefit given to employees by the Government, he pointed out.
The event on the fringe of the conference attracted about 50 people, which included members of the CIOT, representatives of organisations and companies, Tory delegates and journalists.
An audio recording of the event can be found below:
Around the fringe – what employers had to say:
Self-employment was a talking point at other fringe events at the Tory Conference, with companies involved in the ‘gig economy’ having their say.
Carole Woodhead, CEO of Hermes, was a panellist at the Institute of Economic Affairs’ ‘Gig economy – seeing the wood from the trees’ fringe event. Woodhead said a third of couriers have worked for Hermes for five years and tell the company that the flexibility that comes with the gig economy is important to them. She added that policy makers should not underestimate the amount of autonomy couriers have. The CEO welcomed what the Taylor Review had to say about the need for training and benefits for workers but said the ‘dependent worker’ definition that Taylor suggests is ‘wrong’ because she is paying couriers for an outcome. She said that if the Government was to adopt the Taylor’s recommendation on this, it would mean restricting her business. She was keen to say Hermes’ profit margin (six per cent) is quite low and that some couriers would not get out bed for that sort of margin. Hermes pays VAT and is a ‘good corporate citizen’, she added.
Patrick Gallagher, CEO of CitySprint, was also on the panel at this event. Gallagher was keen to tell the audience that only one employee has taken the company to an employment tribunal in 30 years and that bid failed. “We rely on the goodwill of our workers (delivery men and women) to turn-up, so we must incentivise them well.” The CEO said that many of his drivers use CitySprint as a ‘stepping stone’ to work for other companies, which means there is ‘a lot of churn’. If the Government moved to make ‘gig workers’ PAYE, wages would average out and lead to lower pay packets for workers. The meritocracy will go away and his workers want things to stay as they are, he added. He thought the debate about ‘gig workers’ was some kind of government construct to raise taxes on his type of business to deal with the potential loss of tax from other sources, such as fuel duty when electric cars takeover the streets.
Prospect Magazine, supported by IPSE, held an event called ‘What are the myths and realities of self-employment’. Ben Bell, a representative of Uber, was keen to say that much of Uber is new but its work model is not and therefore the debate on gig economy workers should go far beyond Uber. Bell talked about a poll of his drivers which found that 94 per cent of them said they want to choose their own hours. “With Uber drivers are in control”, he said. We learnt that Uber is partnering with JobCentre Plus to help people get their licence and working with IPSE to help drivers get some health/insurance coverage for when they are too ill to work. Uber also claim to be making it easier for customers to tip their driver. “As a business we have made mistakes and I want to put that on the record.” However, he said protestors calling for better conditions for Uber drivers do not represent the majority of Uber drivers.