Hamish McRae, the Independent’s economic guru, has a particular gift of spotting trends well before his peers. Some weeks ago he looked at the numbers in self-employment and returned to this theme last week. The current rise in the self employed began in 2000, ie. while we were still basking in the warm glow of the longest boom the country has ever known. Two years ago there were 3,873,000 people listed as self-employed. That total now stands at 4,131,000.
How should we interpret this dramatic data?
These figures are not the only piece of good news in the last employment trends for MPs concerned about the impact of unemployment on their constituents. Hamish points out that private sector employment seems to be growing at around the same pace as the fall in public sector jobs, but many of these new jobs are part time and we have no way of telling yet from these figures if this is a trend welcomed by the workforce or whether it is a Hobson’s choice. Nor is it known if the unemployed are being pushed into working for themselves, or whether something new is at work.
Hamish suggests that this trend in self-employment might well be permanent. He goes further, supposing the trend in public employment, down from 6.3 million two years ago to 5.9 million, continues along the line predicted by the coalition’s public expenditure projections, with self-employment crossing at about the five million mark. Is it not unreasonable to begin planning for a world where, in five years, there are more people in self-employment than are employed in the public sector.
Such a world would politically be very different from the world Mrs Thatcher left for her successors. It could have a profound impact on our politics and immediately on welfare and taxation. Let me simply concentrate on how this trend could ricochet onto the tax status quo.
It is no secret that the self-employed somehow manage to pay a lower proportion of their income in direct taxation than those of us on PAYE. What challenge does this hold for any government anxious to balance the books? In each year since 2002-3 spending has outstripped revenue as a proportion of GDP. Hence the growing debt.
If we politicians want an adequate revenue to finance even a slimline election manifesto, and yet our certain revenue raising base through PAYE is declining, will we not need to think the unthinkable on tax? What forms of taxation make it difficult for richer people to avoid, let alone evade?
In the postwar period the most elegant advocate of a tax on wealth and consumption was James Meade. A party trying to position themselves ahead of the curve would not only be searching the web for copies of Meade’s work, but would then begin a serious enquiry into how best a shift in the tax base could be engineered and over what period of time.
Over to you Ed. It is never too early to begin work on the details and preparing public opinion.
—————————————————————————————
Frank Field is MP for Birkenhead and former minister for welfare reform
—————————————————————————————
In your dreams, Frank. “Thinking the unthinkable” is usually code for ‘a strong veer to the libertarian right in the teeth of opposition’. As he freely admits, these figures are surmised from trends that may not actually play out in the long term. Lest we forget, this is the man who backs private insurance for unemployment benefit, and an NHS financed by social insurance, as in France, which, strangely enough, he neglects to mention. I’m guessing this is the extension to the thoughts expressed above as to how to ‘balance the books’ and sort out the tax base.
Quite what the Hon Member for Birkenhead is doing in the Labour Party is anyone’s guess, but that’s an argument for another day. A self-confessed admirer of Mrs Thatcher, an advocate of the return National Service, someone who has advised Cameron on poverty, a member of rightwing pro-market health thinktank Reform, an opponent of women’s choice in abortion, a more prime candidate for a Conservative defectee I simply cannot locate
Spot on sir.
http://representingthemambo.wordpress.com/
And of course a member of the Progress bunch of Tony Blair’s New labour, poor old Frank found his niche in New labour then had to move to the Tories to carry on, and labour with Miliband who is not to sure if he’s New labour or Newer labour or is he labour
Labour needs to acknowledge that the economy is changing and more people are working self-employed and freelance. We need a tax and employment system that reflects this, one fit for the knowledge economy and the 21st century. Reform is needed and Labour should be leading that reform.
Speaking as someone who is self employed one of the reasons I don’t pay a huge amount of tax is that I don’t earn very much. We need to get real here, self employment is not always some smart move into entrepreneurialism; it’s a response to unemployment available to some whose housing situation is either resolved (mortgage paid) or where housing costs are low (living with parents). Most of the self employed people I know are doing tasks that used to be carried out by large organisations where their role has been externalised or contracted out usually on much inferior terms and conditions. Of course Labour should be formulating policy that recognises the growth in people working as self employed. What might those policies be – well assistance/incentives with pension provision, insurance cover due to ill health and training/upskilling/career guidance. The kind of support that Trade Unions might provide.