Far from virtuous unicorns, a lot of the self-employed are morally bankrupt – Hammond's right, they should pay up

They drive their white vans on the same roads as employees, they use the NHS the same as their employed neighbours, and their children go to school in the same academies that the offspring of wage slaves attend. Why on earth do they think they shouldn’t contribute?

Sean O'Grady
Thursday 09 March 2017 16:00
The Chancellor’s Budget rightly went after a group who have been getting away with financial murder
The Chancellor’s Budget rightly went after a group who have been getting away with financial murder

You would think from the coverage of the change in the Class 4 National Insurance arrangements for the self-employed, aka “Misery Phil’s Attack on the Strivers”, that the Government was committing the greatest assault on the virtuous since that nasty business with Henry VIII and the monasteries.

There is an idea abroad that the “self-employed” are in some sort of uniquely honourable state of nature, their entrepreneurial instincts to be rewarded with special indulgence by the rest of society, their animal spirits essential to the regeneration of the British economy.

Well, in my experience they’re nothing of the sort. They’re businesspeople or sometimes workers with much the same flaws, moral and otherwise, as the rest to us. They drive their white vans on the same roads as employees, they use the NHS the same as their employed neighbours, and their children go to school in the same academies that the offspring of wage slaves attend. In other words, as Philip Hammond modestly pointed out in his speech – has no one actually read this gag-laden peroration? – they use public services the same as anyone else, and they should contribute towards them same as anyone else.

It is perfectly true that, ages ago, the self-employed weren’t always in a position to pay any National Insurance, and that if they did not do so in sufficient volumes then they would be deprived of the state retirement pension and some classes of social security payments. But Gordon Brown, with his minimum guarantees, and Iain Duncan Smith, with Universal Credit, has put all that sort of stuff behind us.

National Insurance is pretty much divorced from its origins as a contributory payment that would secure entitlement to state benefits and services. It is now just another variation of income tax. It is morally wrong – yes, morally wrong – for some people to have to pay more tax for their public services than others because others are dodging their obligations. And, as the Chancellor again rightly pointed out, the self-employed, and owner-managers of businesses for that matter, still enjoy massive fiscal advantages to their status compared to mere workers, even after this modest hike in NI.

Budget 2017: Gags and gaffes from Philip Hammond's first budget

HMRC is generous in what is allowable as an expense against tax – as we see with the controversy about Martin Clunes’ mysterious surgical procedure – and the self-employed make as much use of this, rightly, as they can. Of course those who “work for themselves” don’t get paid holidays as such, or employers’ contributions to pensions schemes; but they also have much greater freedom about when, where and who they work for. Swings and roundabouts, horses for courses and all that.

That’s the case with the genuinely self-employed, those who work on “gigs”, who have many clients, own their own equipment, can say “no” to assignments or projects, who probably set up their own companies, who have a range of clients and the rest of it. There is, as we all know, though, a second category of entirely bogus, or at best, wishfully-thinking individuals who describe themselves as “freelance” or self-employed, but are no such thing. They are, to all intents and purposes, the same as employees, or casual workers who should rightly be put through the PAYE system. Or the unemployed.

Some have lost their regular employment and, to save face, describe themselves as “freelance” rather than “on the dole”. Others work full-time as de facto employees with one firm and no other lines of income, but pretend to be “freelancers”.

These are, to be blunt, frauds. What is really infuriating is that these scammers will happily use the tax and NI advantages of self-employed status, but when times get tough and a company wishes to dispense with their so-called freelance/self-employed services they will promptly turn around and claim that they are, surprise, surprise, “employees” or “workers” (an EU version of watered-down employee status) after all.

That way they can sue for unfair dismissal, redundancy pay, holiday unpaid, and anything else that springs into the fertile mind of an employment lawyer on the make. Did you know, in fact, that you can be self-employed so far as the tax authorities are concerned, ie under tax law, but still an employee under employment law? How can companies cope with that?

There’s a lot of this double-dealing about, otherwise known as enjoying the best of both worlds – public services paid for on the cheap and reserving the right to skin an employer who willingly went along with your little scheme. So far from moral virtue, many of the so-called self-employed are morally bankrupt.

They would be financially bankrupt too if they paid the tax and National Insurance they ought to. Hammond is right to go after them, and the £5bn a year the self-employment lark costs the Exchequer – more than enough to solve the social care crisis. That moral imperative, by the way, trumps anything the Tory manifesto did or did not say on the subject.

Philip Hammond defends his maiden Budget

As we see with those cases brought by Uber drivers and Pimlico Plumbers, the whole area of employment status is a gigantic mess, with the only real winners the legal bar, because conflicting case laws stretch back far to before the arrival of the office PC, let alone the internet.

The British employment tribunal system is gummed up with queues of claims based on bogus “employee” or “worker” status. Soon the review group led by Matthew Taylor will report on the modern world of work and how the law – on tax and employment rights – can be brought up to date, especially in a post-Brexit world (where European law and the European Court will no longer have any authority).

I am pleased that Hammond has made a start on removing some of the more egregious injustices. More of the same, please, Chancellor.

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