Yesterday, I found myself trying to get my head around what the Taylor Review means for self-employment and small businesses.

When the Taylor Review was commissioned, it had a ‘clear remit to examine the growth of self-employment‘. There has been an undeniable increase in the number of self-employed people since 2008. Forty percent of all 2.2 million jobs created since then have been self-employed. The FSB adds, ‘In 2016, there were 1.3 million employing businesses and 4.2 million non-employing businesses. Therefore, 76% of businesses did not employ anyone aside from the owner‘.

Photo of Matthew Taylor launching the Taylor Review July 2017

So far, the sense I’ve made of the Taylor Review is as such:

The Taylor Review today is quick to make a distinction between self-employment and ‘gig’ workers. Gig workers are people who work via an app or online platform such as Uber, Deliveroo, RatedPeople and People Per Hour. Much of the debate appears to be around the gig economy and the government providing more protection for these ‘dependent contractors’. The Taylor Review wants to change the terminology – ‘gig workers’ should be ‘dependent contractors’ in order to differentiate between them and self-employed.

Taxes may increase to address government losses

However, looking into the implications on self-employment and owner-managers, I found the issue of ‘fair tax’ rises again. Do you remember Philip Hammond backtracking after last Autumn’s budget? He faced opposition to plans aimed at taxing the self-employed on a level more akin to those employed. Yesterday I read, ‘the sharp rise in self-employment in recent years, to 15 per cent of the workforce, is effectively costing the Government around £2bn a year in revenues‘. And ‘the rising trend of self-employed individuals to create their own companies, which pay a lower rate of tax on income than individuals’.

At this I wonder if a version of Hammond’s original proposal will return to the table. Then the cynic in me recalls the rise in the number of small businesses coincided with the introduction of austerity. A huge number of job cuts forced people to set up their own business in order to survive. Was the government in fact responsible for creating this loss in revenue?

‘Incentives’ to pay pension and benefits insurance

Leading the review Matthew Taylor, said, “It’s a problem for the public as a whole that too many self employed people will be retiring not being able to support themselves and too many self-employed people are not insuring themselves”. This is an issue. However, I suspect not because self-employed people don’t want to insure themselves or don’t need a pension. Self-employment is incredibly challenging and risky. Your income stream can be extremely erratic. The number of hours you put in can far outweigh the level of income you generate. Business-changing contracts can be lost because you’re not considered big enough. Many also constantly fear losing work because someone else (usually a larger business) will undercut you.

Beside this, you have to cover costs and wages in times when customer demand is low. Austerity, or tightening up of the supply chain you feed in reaction to Brexit uncertainty are timely examples. Simply generating a steady, reasonable, income as a self-employed person is not a simple thing. Now factor in pension payments on top of that…

The FSB highlight, too, that ‘the self-employed have for too long been left out of policy decisions and suffer compared to employees on a range of crucial issues – in particular on rights, the risks they face, the volatility of their income, Government program[me – English spelling FSB!]s and tax-funded spending on policies such as pensions auto-enrolment, the performance of private markets in areas such as insurance, the design of the benefits system, and on social issues ranging from isolation and loneliness to their ability to balance the demands of work and their personal life’. British self-employed people lack the investment and support given to employed people.

You’ll remain the ‘backbone of the country’

There is interesting context to this current situation. The RSA themselves found ‘UK businesses are becoming increasingly micro in size – reducing the overall potential for economic output and future growth, and increasing the economy’s reliance on a relatively small number of larger businesses’. Yet Theresa May claimed, “From dynamic start-ups to established family firms, our small and medium sized businesses are the backbone of our country“. She recognises that, ‘Britain’s 5.4 million small and medium sized businesses provide people with jobs, put food on families’ tables and underpin the strength of our economy. They are a fundamental part of my vision of building a country that works for everyone, not just the privileged few’.

As a self-employed person or owner-manager, it’s possible the Taylor Review will mean you pay more tax, pension and insurance contributions. Reading between the lines this is to protect the government against the fact it’s failing you. At the same time, the huge risk and lack of government consideration will likely continue. Only perhaps the impact of Brexit will mean you’ll have to fight for yourself more. You are also amongst those businesses who have little scope for growth. However, you have huge responsibility for the livelihoods of British people. Thank goodness Taylor believes that his recommendations ‘should not add to the burden of business‘.

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