How new prime minister Liz Truss can help the self-employed bounce back

Even the busiest of self-employed freelancers should have by now had a second to look up from their work to realise that the election is finally over, following almost eight grueling weeks of hustings.

It officially happened yesterday, when after a summer of campaigning by both former chancellor Rishi Sunak and (now former) foreign secretary Liz Truss, the Conservative Party chose Ms Truss to be their next leader. And so today she starts as prime minister.

While Truss has a number of issues that she needs to address in Number 10, she shouldn’t forget to help one of the most innovative and dynamic parts of the UK economy -- the self-employed, writes Andy Chamberlain, director of policy at the Association of Independent Professionals and the Self-Employed (IPSE).

Vital, but also in peril

Self-employed workers are vital to the future of the UK as they contribute an estimated £303 billion per year to the economy. They also provide valuable skills and experience to thousands of businesses across the country.

In fact, IPSE research has shown that half of UK businesses believe that they could not achieve their level of growth and outcomes without the help of contractors or freelancers.

However, despite their vital support, freelancing is currently in a perilous position. Over the past two years, the number of self-employed workers has fallen dramatically by 80,000, as coronavirus pandemic uncertainty has forced thousands of freelancers to either retire or abandon independent work altogether. For those freelancers who have remained in self-employment, they haven’t necessarily fared much better. Many have failed to increase their fees to pre-pandemic levels, and some have even fallen into debt following the emergence of the cost of living crisis.

Time for action

We believe that if the sector is going to reclaim its position as one of the leading lights of the UK economy, then Truss and the new government needs to act. In particular, we think that she needs to tackle one of the most important issues currently destabilising self-employment and forcing many to leave professional freelancing altogether: IR35 reform.

Introduced in the private sector in April 2021, the flawed reform to the off-payroll rules has fundamentally changed how incorporated freelancers are taxed. The HMRC framework has shifted the responsibility for determining notoriously difficult employment status decisions from workers onto their clients.

And it has resulted in more than one-third of freelancers quitting independent working outright, since the changes took effect.

Truss understands IR35 reform's adverse effects

Thankfully, Truss has already shown that she understands this issue. During the campaign, the prime minister announced in an interview with The Sun that if elected, she would order a governmental review into the flawed reform of IR35. During her campaign to secure No 10, she also repeatedly talked about the need to overcome ‘Treasury orthodoxy’ and overturn existing government policies. Truss looks like she’s in a good place to do this overcoming of orthodoxy, given that she is a former chief secretary of HM Treasury.

However, if she is going to actually help freelancers and other self-employed professionals ‘on the ground’ today, then Truss needs to turn her campaign rhetoric into action.

Self-employed people have seen numerous reviews of status and similar issues (like personal service companies) before. But none of them have led to meaningful change. Instead, the issue has been left to grow, with thousands of self-employed workers and often their clients, suffering as a result.

Nothing can be off the table

If the Truss-led government is going to be successful, then this time it needs to be different. In other words, prime minister Truss needs to break with the past and announce a review that actually leads to radical change.

This means leaving nothing off the table, including scrapping the dreadful reform of IR35 altogether.

Truss and her team will understandably be overjoyed by yesterday’s result, even if it was tighter than expected (57% Truss: 43% Sunak).

A danger looms for the new PM

But the new prime minister shouldn’t forget what helped her secure the keys to Number 10 in the first place.

Thousands of contractors and freelancers have been severely impacted by the changes to IR35, and her promise to review the flawed reform of the Intermediaries legislation will have given her the support of a significant number of the UK’s self-employed.

If she ignores their pleas in government, then she will have jeopardised one of the most dynamic parts of the UK economy and damaged her leadership before it has even properly begun.

 

6th September 2022

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