Winning over the self-employed

The announcement last week that the government had appointed its first ever ‘self-employment tsar’ reflects an important change in the way Britain works. One in seven of the workforce is now self-employed. On current trends, the self-employed are set to outnumber the public sector workforce by 2020. With an election approaching, the political courtship of this group has begun in earnest.

The self-employed are, of course, a diverse group, ranging from construction operatives to care workers, software engineers to freelance journalists. Amid this diversity, however, there are some shared experiences and frustrations that any incoming government should seek to address.

Some of these frustrations fit neatly with the story that Labour has been developing about a more ‘responsible capitalism’. Often the self-employed find themselves outgunned by larger corporations when it comes to disputes over contracts or the late payment of invoices. They are reluctant to enter into costly legal battles with large companies that have far greater resources at their disposal. And they worry that invoking the legal right to charge interest on late payments may cost them the opportunity to win future contracts.

Labour should, therefore, be looking at ideas which redress the power imbalance between large companies and smaller businesses, including the self-employed. One idea, recommended in a recent Demos report, is that the United Kingdom should learn from the Australian experiment with ‘small business commissioners’ at state level. These commissioners, backed by statutory powers, offer mediation and dispute resolution in exchange for a small fee. In doing so, they help produce a fair outcome without the protracted legal wrangling that most self-employed people know they cannot afford.

There are other ways in which Labour could help level the playing field between large and small. One example is the way the tax system treats the investment in skills and training. While companies can claim tax breaks for training their staff, the self-employed enjoy no such luxury. If the self-employed are learning as new skill, they can claim nothing back. This makes no sense in a world where the self-employed must trade on the value they can add to organisations.

Public procurement is another area where more opportunities could be opened up to small companies and freelancers. Despite recent progress, it is still the case that small businesses and the self-employed are often put off from even bidding for many government contracts, due the bureaucracy involved.

Labour should commit to pre-publishing all procurement documents in an open source format, so that would-be contractors can suggests edits to tender documents before the process formally opens. In doing so they could work with the civil service, in an open and transparent way, to streamline the requirements on companies bidding for work. More competition would be good for freelancers, but also for the taxpayer.

Most of all, Labour must continue to demonstrate that it understands why people might make a positive choice to work for themselves. To some extent, self-employment involves a trade-off between freedom and security – and the party’s instincts can lean towards the later of those two values rather than the former.

This does not mean ignoring questions of exploitation, including the denial of the employment rights in some workplaces. But it does mean striking the right balance in the way the party approaches self-employment, as the shadow team, supported by LFIG, have sought to. With the political battle for the self-employed heating up, it makes political as well as policy sense.

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Duncan O’Leary is research director at Demos. The Demos report on self-employment can be downloaded here

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Photo: Markus Spiske

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