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How the UK’s Self-Employment Dream Turned Into a Nightmare

The government's tax hike is just the latest issue facing those who "go freelance".

(Top phot: Pixabay/jeonghwaryu0)

If you caught one thing from the UK's Budget announcement on Wednesday, it was probably the Chancellor's decision to slap the 15 percent of the UK's working population who are self-employed with higher national insurance contributions, or more tax.

Chancellor Philip Hammond pledged to increased Class 4 national insurance for self-employed people twice in the next two years, from 9 percent to 11 percent on income up to £45,000. He justified this by saying self-employed people use public services in the same way, "but are not paying for them in the same way".


For 2.5 million people, that translates to an annual increase in national insurance contributions of £240. Some of these people may decide that it's not worth being self-employed and get a contract. But many will not have the choice. Couriers, drivers and higher education workers are among those forced into self-employment through agency or app-based work.

"The self-employed are among the lowest paid and most vulnerable people in our society. To target them by increasing their national insurance contributions is picking on the weak," said Ursula Huws, Professor of Labour and Globalisation at the University of Hertfordshire.

As traditional (PAYE) wages have stagnated and companies have become less willing to offer full-time positions, self-employment is on the rise, with the total considering themselves self-employed up 45 percent since 2008. The UK has more self-employed people than anywhere else in Europe.

Businesses that rely on self-employed workers tend to paint this situation as a workers' utopia, where more people are liberated from the soul-crushing routine of the nine-to-five. But the reality for most people is not loafing around writing blog posts in their pyjamas and eating peanut butter straight out the jar.

Research shows that self-employed people earn 40 percent less on average. Lower earnings mean people pay less taxes, and that's opened up a massive £5 billion hole in the government's tax revenue this year alone. That's the main reason the Chancellor is pushing for higher taxes for the self-employed, to raise an extra £1 billion for the Treasury in the next five years.


"We did this survey about agency work and self-employment and found that it was most common in social care, hospitality and teaching, which are not really the sectors you think about for automation. These sectors have tight cross margins that are being forced onto workers, who are forced to take on more risk," said Kate Bell, head of economic and social affairs at the Trades Union Congress (TUC).

"The government is painting its raising of self-employment NICs as 'levelling the playing field', but really the move is further punishing some of the country's most economically-vulnerable people."

According to the TUC, 1.5 million employed people are at risk of missing out on family-friendly rights, including rights to maternity, paternity, adoption and shared parental leave (including the right to return to their jobs after time off), an increase of 700,000 compared to a decade ago. They calculate another 1.7 million self-employed people also lack access to these rights and are paid so poorly they cannot protect themselves if something goes wrong.

Low paid self-employed people are more likely to be male, people of colour and working in construction, administration, transport and storage. The majority of those on zero hours contracts are women, people of colour and young, between the ages of 16 and 24.

The government is painting its raising of self-employment NICs as "levelling the playing field", but really the move is further punishing some of the country's most economically-vulnerable people. There are other ways for the government to improve tax revenue – for example, by raising the minimum wage so people are earning more and pay out relatively more in tax. Instead, by adding to the tax burden on the self-employed, the government risks pushing more people into poverty and deeper insecurity.


"There is abundant scientific evidence that being in precarious employment increases psycho-social risks and is damaging to individual wellbeing and social cohesiveness," Professor Huws says. A World Health Organisation report found that temporary workers had higher mortality and worse mental health.

Working from coffee shops seems like a small consolation for missing out on key rights and protections at work and the anxiety that comes with not having enough money to protect yourself.

Kate Bell said one way self-employed people can protect themselves is by joining unions to ensure they have some protection if things go wrong. Professor Huws points to the increase in workers' co-operatives, democratic organisations owned by members that can offer financial and non-financial benefits, training and mutual support.

Self-employment should be a choice. When it is, it can offer higher levels of job satisfaction. But more often than not, employers are choosing not to offer benefits to workers to minimise costs. By raising taxes, the government is contributing to a toxic environment where those with precarious work feel even less secure.