Did the government just say it wants more self-employment?
- 10 Aug 2023
Work and Pensions Secretary Mel Stride came in for some criticism last week when he suggested out-of-work over 50s should deliver take away food via apps such as Deliveroo. Comments on newspaper websites and on Twitter (sorry Mr Musk, I can’t yet bring myself to use the new name) demonstrate the importance of choosing your words carefully, especially when you are a comfortably-off Conservative Government Minister. But if we look carefully at what Mr Stride actually said – and not focus on where he was when he said it - it’s quite possible that IPSE would agree with him.
“Log on and off anytime you like”
The Secretary of State was visiting the headquarters of Deliveroo in London when he said: “What we’re seeing here is the ability to log on and off anytime you like, no requirement to have to do a certain number of hours over a certain period of time, which is driving huge opportunities . . . From an employer’s point of view in a tight labour market, it’s absolutely essential if you want to access all the available talent that you provide as flexible an offer as you can.”
What is being described here is self-employment. The government may not want to admit that out loud – it has done quite a bit to dampen self-employment over the last few years – but this statement appears to recognise the importance of flexibility and autonomy to individuals and it urges ‘employers’ to offer this to their workforce. The word ‘employer’ here is ill-used. ‘Hiring firm’ would be better, after all, Mr Stride is quite specifically not talking about employment.
Self-employment isn’t for everyone
Self-Employment is risky. There is no guarantee of getting work and it’s possible you may not get paid on time, or in some cases, at all. When you do have work, you might find you’ll have to work very long hours in order to prevent knock-on delays to the project. You can go on holiday when you want to but you won’t be getting paid, and if you get ill – you’re on your own (although Freelance, Director and Kickstart IPSE memberships offer illness and injury protection).
For a lot of people, perhaps most people, employment is a safer bet. But despite the inherent risks of working for yourself, there remains a proportion of our labour market that wouldn’t have it any other way. They love the freedom and flexibility of self-employment; the ‘not-having-a-boss’; the control over the work they do; the way they do it and the hours they do it in. This independence appeals to individuals of all ages, but notably, those aged between 50-59 make up the biggest grouping among total self-employment and they have done for the last 4 years according to our annual Landscape report.
Economic inactivity and growth
So perhaps Mr Stride is on to something here. There is a demographic which is disproportionately attracted to self-employment, and which the government has identified as being ‘economically inactive’ which is another way of saying ‘not working’. The government is desperate to get them back into work because it has promised to deliver growth and most economists agree that the lack of people in the labour market is one of the biggest barriers to growth in the UK right now. Maybe they don’t like the idea of being employed, perhaps put off by the possibility of reporting to a boss that is fifteen years younger than them. Maybe employers don’t want to employ the over 50s – there’s good evidence to suggest they don’t. Maybe then, the answer lies in empowering the over 50s to work for themselves.
The pandemic and falling self-employment
The problem is, the over 50s – some of them anyway – were working for themselves, but they retired earlier than planned. They did this for two main reasons. One was the onset of the pandemic which saw work opportunities vanish overnight. Many of these business owners were ltd company directors and as such they were not able access the government’s Self-Employed Income Support Scheme, so they had no money coming in and their businesses closed down. To be fair to Mr Stride who was the Treasury Committee Chair in 2020, he called on the then Chancellor to do more to support this group (in fact he fully backed IPSE in this matter). Unfortunately Rishi Sunak wasn’t prepared to adjust the support schemes accordingly and company directors had to fend for themselves, which inevitably meant some stopped working.
IR35 and falling self-employment
The second reason is of course IR35. As Financial Secretary to the Treasury between 2017 and 2019, Stride pushed forward the changes to the rules in the private sector which eventually came in in 2021. The changes created a huge disincentive for firms to hire contractors. Here was the government very clearly saying ‘we do not want people to be hired on a self-employed basis’. IR35 is all about getting people on to the payroll and that tends to mean stopping them working for themselves. That reduces the flexibility and independence they crave and in turn makes work seem less attractive for that proportion of the over 50s that don’t want to be employed by someone else (and perhaps doesn’t make for particularly good employees!)
By not adequately supporting the self-employed during the pandemic and then by bringing in the IR35 rules, the government has fuelled economic inactivity among the over 50s. The government is right to suggest that self-employment could be a good way to attract some of those people back to work but it must do more than just encourage them to work for gig-economy apps. It must create fair tax and employment status rules that enable individuals to work for themselves and embolden firms to hire those individuals. In short, the government must decide what it really wants – a rigid labour market where everyone is on PAYE, or a more flexible, dynamic labour market where people can work on their own terms. If they are serious about growth, we would suggest it must be the latter.
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