The self-employed have had it far too easy for far too long. While ordinary employees are grinding away at their 9-5 jobs, paying 12 percent of their earnings to the government as National Insurance, the self-employed are laughing at them, contributing a measly 9 percent.
Well all that’s about to change. In his first Budget today, Philip Hammond made it clear the double standard has to end. It was, he said, not “fair” that the total National Insurance bill for employee earning £32,000 a year would come to £6,170, including contributions from both the employee and their employer, while the equivalent for a self-employed person earning the same amount would be just £2,300. After all, the self-employed enjoy the same public services as employees, so why should they pay less? To rectify this staggering discrepancy Hammond decided to risk violating the 2015 Conservative Manifesto pledge and announced he was raising National Insurance for self-employed people.
Not so fast. Firstly, the example Hammond used is misleading, as over half of that £6,170 worth of National Insurance in the first instance is paid for by the employer, not employee. The difference in what the two workers both earning £32,000 would actually pay comes to just over £500 – hardly a massive injustice to right.
But more importantly, self-employed people manifestly do not get the same benefits and protections as salaried employees. Here are just some of the perks of being an employee: state-mandated holiday pay, sick pay, parental leave, compassionate leave, workplace pensions (often with employer contributions), prescribed notice periods, protections against being laid off or harassed. Those are some pretty substantial differences. And that’s before you consider the basic security of knowing you have a job for the foreseeable future, rather than winging it one week to the next, hoping work will come up.
Don’t get me wrong, being self-employed comes with its own set of advantages. Complete freedom and flexibility is worth something. But it’s a trade-off: more independence, less certainty. And if you suddenly get ill and can’t work for a month or decide to have a baby, you are not going to get paid. That insecurity is reflected in lower rates of National Insurance – or it was, until Philip Hammond got his hands on it.
The future of work is changing. It’s not just artists and website developers who are self-employed now – the so-called gig economy has altered the playing field and made self-employed contractors out of everyone from taxi drivers to warehouse workers to catering staff. And yes, this is getting a disproportionate amount of attention because many journalists and political commentators are themselves self-employed, but that doesn’t change the fact that this increase – which is essentially a tax rise – is going to affect 4.75 million people in the UK.
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All this could have been easily pointed out at the time, if we had an opposition leader prepared to stand up and defend sole-traders and budding entrepreneurs. Alas, we have Jeremy Corbyn. No defence came.
If Hammond wants to raise taxes, fine. But his assertion that the self-employed have been skiving off paying their fair share all this time is just plain wrong.