Suddenly, government doesn’t want to talk about tax

In September, ministers announced the end of ‘box-ticking’ consultations to speed up the delivery of new policies. The employment status consultation we’ve been waiting for? It was published yesterday.

Even the government got tired of waiting for consultations before this one saw the light of day. That’s how overdue it is.

But what’s worse than the wait is that this consultation doesn’t live up to expectations. Whilst it rightly puts false self-employment squarely in its sights, it does very little to make life easier for people who want to stay self-employed.

And it begs the question: if the government has lost faith in the consultation process, what faith should we have in this one?

The government is concerned that employers misclassify their workers as self-employed as a way to avoid being on the hook for employment rights and the minimum wage. They’re asking for feedback on reforms that would make it harder for businesses to claim that their workforces are self-employed, particularly in cases where individuals are subject to a high degree of control.

Crucially, this would involve putting less emphasis on factors such as the worker’s right to a substitute, which has been decisive in keeping some gig economy models on the right side of the rules. The government is determined to bring this to an end.

And the current system of individuals taking businesses to a tribunal to claim they have been wrongly classified as self-employed would be flipped on its head. The government is instead proposing to flip that burden of proof, with employers having to demonstrate that someone is genuinely self-employed.

The paper also asks for feedback on new blacklisting protections for the self-employed, which can be a concern for unionised sectors of self-employment.

These are reasonable measures, one which we support. Self-employment should always be a deliberate and informed career choice, not a loophole for employers to avoid their obligations.

So why did we issue a critical response after the consultation was finally published? Because it avoids one big elephant in the room. Tax.

Whatever changes arise from this consultation, it will not create a truly clear definition of self-employment.

Responding to the announcement yesterday, I described tax and employment status as “two sides of the same coin”, and with this consultation the government is polishing only one side of it.

That means it will still be possible for a person to be denied real employment rights, despite paying employee taxes. And it means freelancers who are perfectly happy not to receive employment rights can still be told by HMRC that they need to pay an employee-style tax bill years later, despite operating as an independent contractor.

Clients and agencies will also continue to face jeopardy over hiring freelancers and contractors; a retrospective Employer National Insurance bill would be a financial and reputational nightmare, and still a real possibility under these proposals.

We all know the Treasury calls the shots in Whitehall. The fact they are nowhere near this consultation – one which could still significantly change tax receipts – is a real concern. And it is not helped by the fact that the government has seemingly fallen out with the consultation process. And reading the Labour government’s manifesto commitments in this area, my skepticism grows deeper.

Check the fine print: Labour committed to “consult” on employment status. Not reform, not deliver, but consult. By publishing this, they’ve met their commitment. They can add it to their tally in good faith.

Ultimately, what this consultation does is take a lot of people out of self-employment who probably should not have been there to begin with. But what it doesn’t do is make things much easier for the people who want to stay.