Socialist Worker

The real national insurance scandal is bogus self-employment

by Charlie Kimber
Issue No. 2545

Philip Hammond in happier times (IE yesterday)

Philip Hammond in happier times (IE yesterday) (Pic: Socialist Worker)


What’s the truth about the changes in national insurance contributions (NICs) for self-employed people?

The Sun, the Daily Mail, assorted Tory MPs and some Labour ones are outraged at the threat to “white van man” in Tory chancellor Philip Hammond's budget yesterday.

Self-employed national insurance contributions are to rise from 9p in the pound to 10p next year and 11p in 2019.

But note that the right-wingers attacking the rise haven’t even mentioned the much greater attack on benefits that will hit millions of people (see below).

And the real scandal about self-employed people is different to the one that is highlighted.

It’s true that, taken together with other tax changes, the rise in does hit some low and middle earners—anyone on over £16,250 a year.

But the biggest hit (quite rightly) is on higher earners with anyone getting over £50,000 paying a little over £600 more tax each year.

As one analyst wrote, “The big losers would be self-employed management consultants, accountants and lawyers rather than a low paid plumber or hairdresser.”

Hammond’s changes means that former chancellor George Osborne will pay £720 a year more tax on his self-employment earnings making speeches in 2018-19. Good.

It’s hardly going to trouble him given that he has just landed a job with US financial giant BlackRock for which he will get £650,000 a year for working one day a week. That’s £13,542 a day.

In any case the big scandal in this area is an expansion of fake self-employment so that companies have to pay less. Rich individuals are also marketing themselves as self-employed.

There is presently a massive tax advantage for high earners to classify themselves as self-employed.

This gives the lie to the Tories who try to pose the issues as backing up “Dragons’ Den entrepreneurs”.

The next four years are on course to be even worse for the poorest third of households than the four years following the 2007-8 financial crisis

There are “self-employed” people in construction, education, retail, cleaning and so on who are really workers—but their bosses don’t have to pay NI for them.

These workers have far fewer rights or no rights at all to benefits, holiday pay, pensions, sick pay and employment rights.

This has long bedevilled construction, it now hits taxis firms (Uber notoriously) and delivery staff (Deliveroo for example).

There are more and more people in finance and health who do effectively the same job as workers but have magically become “self-employed”—and the bosses benefit.

As an article from the Resolution Foundation said on the eve of the budget, “The real debate about tax and the self-employed lies not in the National Insurance individuals directly pay but with the fact that firms pay 13.8 per cent employer National Insurance for everyone they employ, but nothing if they use self-employed labour.”

That’s why TUC general secretary Frances O’Grady was right to say, “The acid test for the Chancellor's self-employment tax changes is whether they crack down on employers who force low-paid workers into bogus self-employment.”

None of this means we should support Hammond’s manifesto-breaking NICs change for the self-employed. Low earners should be exempted.

But it’s not the real issue. We should keep our eye on the big picture. There were tax cuts for the corporations and the rich, and no pay rise for public sector workers.

There was effectively no extra cash for the NHS and pathetically little for social care.

The next four years are on course to be even worse for the poorest third of households than the four years following the 2007-8 financial crisis.

Average pay across the decade to 2020 is set to be lower than the average for the decade before.

That would represent the worst decade for real earnings growth in 210 years.

None of the Tories now “rebelling” against Hammond will be fighting that.


The benefits cuts Hammond's budget didn't mention

Activists from Disabled People Against Cuts protested against cuts to Personal Independence Payments earlier this week

Activists from Disabled People Against Cuts protested against cuts to Personal Independence Payments earlier this week (Pic: Socialist Worker)


A new raft of attacks on welfare will come into effect later this month or next month.

Hammond didn’t have to announce them, because they were scheduled at the 2015 summer budget.

But they will mean suffering for tens of thousands of people.

They include:

  • Working age benefit rates remain frozen. April 2017 is the second year of a four year freeze.
     
  • A £30 a week cut for new Employment and Support Allowance claimants in the work-related activity group. This will slash around a third of the current weekly benefit, and in the long-run will take £680 million a year from 450,000 people.
     
  • Removing extra tax credit for first child for new claims. Over the long-term this takes about £2 billion a year from 4 million families.
     
  • In households with two or more children, any subsequent children born after April 2017 will not be eligible for tax credit support. This hits nearly one million families.
     
  •  Withdrawing entitlement to Housing Benefit from most 18-21 year olds. This will hit 10,000 individuals a year by 2020-21.
     
  •  Amendments to Personal Independence Payment eligibility will also due to take effect on 16 March. The changes reverse the effect of two recent tribunal judgments, and will hit over 150,000 people.
     
  • Widowed Parents’ Allowance will be replaced by a new Bereavement Support Payment for new claims.
    Campaign groups and those who will be hit by the changes had lobbied Hammond not to push through the cuts, but he spurned them.
    Charity Childhood Bereavement Network said the new guidelines could leave parents with children as much as £12,000 worse off.
    The government will also stop new claims from parents who weren't married to their partner, even if they had lived together and had children. Over 2,000 families with children could lose out each year.

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