The government should rewrite the rulebook on tax and welfare if “the right type” of self-employment is to prosper, a think-tank recommends.
Only by overhauling taxation, welfare, pensions, insurance, competition law and business support can self-employment that is both economically secure and flexible flourish, says the RSA.
For too long this hasn’t happened, as “successive governments have neglected to consider how [these] policy areas” can do more to support freelancers than the age-old, two-pronged approach.
The Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) explained: “[Self-employment] has been failed in recent years by…broad-brush deregulation and misguided corporation tax cuts.”
To end this dual policy, which a new report by the RSA condemns as “shallow and narrow,” an existing government commitment to lower corporation tax to 17% should be scrapped.
The society’s reasoning is that the tax only affects self-employed people who have incorporated (to become a limited company) and, of those with staff that pay it, only a fifth have cited it is an obstacle to success.
Six other recommendations are also tabled in the report, including a proposal to give people who work for themselves, such as sole trader freelancers, a new set of “rights and responsibilities.”
Under it, “some” self-employed people would pay steeper National Insurance Contributions in return for greater social protections, potentially by pay NICs at the same rate as employees (12%).
“Self-employment is here to stay – which requires a much more serious and ambitious response from policymakers equalising,” said RSA’s Benedict Dellot, the report author.
“[For example], equalising National Insurance Contributions so that the self-employed can for the first time receive proper maternity and paternity pay.”
A similar call to the government was made late last month, when a cross-party group of MPs said the maternity allowance -- which freelancers receive -- should be part on a par with the more generous statutory maternity pay -- which employees receive.