Would greater government support for contractors grow the contracting sector and its contribution to the UK economy, as well as improve the lot of contractors? Or would any government assistance backfire, and damage the effectiveness of our highly skilled and flexible knowledge-based workforce.
A compelling article by the Telegraph’s Matthew Lynn, Imagine how good the economy would be if Government actually helped the self-employed, argues that the unprecedented fall in unemployment and a significant element of the economic recovery can be attributed to the growth of the self-employed and contracting workforce.
It is great to see that someone has acknowledged the contribution that contractors, freelancers and the self-employed have made to the UK’s economic performance.
Growth in the self-employed workforce, highlights Lynn, has been achieved with seemingly no government assistance: “If the self-employed are doing this well without any help from the government, think how much better they might be doing if they actually got some breaks.”
Lynn goes on to suggest a range of actions that would cost little to the Exchequer but could help grow the self-employed sector further, and reduce its administrative red tape burden.
These include adopting policies such as raising the 40% tax and VAT registration thresholds, and making it cheaper for the self-employed to hire an assistant (to help deal with all the remaining paperwork imposed by government).
Although the focus of Lynn’s piece is on self-employed sole traders, rather than employed limited company contractors, certainly some of these initiatives would also be beneficial to the contracting sector. Elevated higher rate tax and VAT thresholds would be a huge benefit to many contractors.
And it goes without saying that abolishing the False Self-Employment legislation and IR35 would go a long way to cutting the costs of running a contracting business. The savings could contribute in a major way to the productivity of the sector, with the commensurate positive impact on the economy.
But all government policies, initiatives and schemes come with a health warning. These are usually as a result of the ‘law of unintended consequences’, when the scheme has not been fully thought through or properly consulted on.
Plus, we’ve seen successive governments, prompted no doubt by Treasury and HMRC civil servants highlighting that employees get taxed more, put increasing legislation in place. This is generally to class workers as employees and not self-employed or in business in their own account.
Evidence from multiple sources, including PCG, has shown that contractor numbers have grown and the contribution the sector makes to the economy has increased since the recession began.
This is largely despite and not because of government actions. The world of work and business are changing, leading to clients recognising the value of flexible workers as much as their core employed workforce, and thus fuelling contractor demand.
So, do contractors really need government help? Or is it best just to let independent professionals and the self-employed remain their own bosses, beholden to no one, as was their intention when many took the leap into contracting?