It’s a truth as old as the hills that there are two types of self-employed. Those who choose to be and those who have no choice.
Most people who read this blog have more experience with the “professional” classes who choose self-employment – these include most doctors, partners in professional practices and broadcasters like Paul Lewis who prefer to be on the outside looking in.
Those paid in cash
My readers don’t tend to know so well those people who haven’t got “proper” jobs but are just getting by from jobbing work, what “contractors” call projects and what these people call jobs.
The UK economy finds it hard to measure those just doing jobs as much of the work is paid for in cash. This cash work is not recorded by HMRC for VAT or income tax purposes, nor does it count at the DWP as the RTI from the revenue never touches someone’s national insurance record.
Relative to some other European economies, this jobbing work is small beer as a percentage of our GDP but it is a significant element of the social economy and causes significant resentment not just in Government circles but within the socio-economic group where most of this work goes on. There is high anecdotal evidence of whistle-blowing against benefit cheats but in my experience those in the cash economy form an important self-protecting group who’s motto might be “judge not that ye be not judged”.
Those putting work through the books
A big source of resentment of the cash economy is from those “playing by the rules” who have to price against those who don’t. Get in a licensed cab and see the fury when an unlicensed cabbie is spotted, there is justifiable anger, those who pay no tax , tend not to be insured for what they do. There is a real social cost to unlicensed trading.
I struggle to understand why many people who are self employed do not move to employed status.
At the Payroll World Autumn Update, Angela Knight spoke feelingly about those artisans who regularly work for her – looking after her ancient house. Apparently they meet at her place on a Saturday morning and compare notes (with Angela an eager observer). She spoke of a painter who fell off his ladder and lost three months work. He had no income protection insurance and had not paid the voluntary stamp necessary for him to have immediate state aid. He had subsequent to his accident made enquiries as to the cost of cover; he was told by those within this Saturday morning kitchen cabinet that he would get better value for money by paying voluntary NICs.
The arguments around the Uber judgement are similar to those in Knight’s kitchen, the cost of self-employment in terms of the loss of employment rights and social insurance can outweigh the marginal benefits in cash-flow.
Respecting the system – but will the system respect you?
The biggest obstacle to progress in the reform of our taxation and national insurance system (the subject of Angela Knight’s address) is IMO mis-trust. There is mis-trust of Government of the self-employed, mis-trust of the self-employed of benefit cheats and mis-trust for those doing cash-paid jobbing work of both Government and those putting their work through the books.
Every conversation I have with those who work as self-employed reverts to these questions of trust. There has always been supposed an entrepreneurial element to self-employment but I think this is grossly overstated. In my time as self-employed (1983- 1992), I was mostly getting by, I felt marginalised and ultimately when I ceased trading on my own account- I felt enormous relief.
For self-employment is enormously labour intensive, the maintenance of records on expenses , revenues and liabilities for VAT represent a considerable compliance burden which is managed more effectively by companies. My experience was that the freedoms of self-employment were illusory. When I entered full employment, I was surprised how quickly my distrust of “the system” fell away.
But I know there are many self-employed people, including many who work in the gig-economy, who do not trust the apparatus of the state and are deliberately marginal. I know this because I still spend time with them. They do not trust big Government for a variety of reasons and their marginalisation is a major challenge.
The lessons of populism for HMRC and DWP
I think that politicians should get out more. Angela Knight’s kitchen cabinet is “getting out” in that sense – she is engaging with people at the margins out of real social interest.
The Matthew Taylor report into the nature of work in the UK is a great opportunity to get out and talk to people in marginal employment and find out what is really going on. I am really keen to be involved in this project.
In terms of my specialist area, pensions, I am particularly keen to find out how people who are making little or no earmarked provision for retirement are planning ahead (if they are).
I want to know whether the fall in the use of self-employed pensions by those outside the professional self-employed has fallen.
The lesson that May’s Government seems to have learned is that the answers to the problems of employment marginalisation, may not be through Governmental interference but in Governmental understanding.
The centre may not hold and may need to shift, what we call full or normal employment (“a proper job”) may need to have a new name and what we call marginal, may become central to our economy.
Respect for the self-employed
I don’t think the traditional demarcations between employment and self-employment work. So much has changed since when I started working nearly 35 years ago, but the fundamental alignment of tax and national insurance to the needs of those in these two groups has not changed very much at all.
Angela Knight, in what I thought an excellent address, admitted as much. She specifically mentioned the Matthew Taylor report as a means of expediting change to a more modern way of doing things.
I would like to see a new contract of trust between those at the margin and those in the centre that was based on a shift towards greater respect from both sides. But I think that it is incumbent on Government to lead the way in that respect. And in “that respect”- I mean greater respect from Government for those not in “ordinary” employment