THE BLOG

What Can Government do to Help the Self Employed?

26/10/2014 18:57 | Updated 26 December 2014

It's taken six years to recover from the heart attack our economy faced after the 2008 financial crash but, according to figures released by the ONS, the economy grew by 0.8% between April and June this year. While using GDP alone to measure the strength of the economy is problematic, it is nevertheless a clear indicator that the hard decisions we took in 2010 are paying off. The recovery is happening.

It's been a long, arduous and challenging journey, but I am proud of my Party. We could have clung to the safe shores of opposition sniping. Instead, all hands on deck, we rolled up our sleeves and worked to fix things.

But this article isn't about claiming credit for the economic recovery (although we can and should: the Lib Dems ensured stable government when it was needed most). Rather, it's about the profound changes happening in our labour market.

Digging behind the good news on the economy, it's clear that one of the biggest groups to emerge enlarged from this upheaval is the self-employed. And I think we need to do more to help them.

To put this change into perspective, CityAM recently quoted ONS statistics: '...for the 12 months to March 2014, the number of self-employed people in Britain increased by eight percent, which was more than any other Western European economy... In 2014, 4.6m people were self-employed in their main job, accounting for 15% of all those in work, the highest percentage since data were first collected 40 years ago.'

Across the European Union the UK has had the third largest percentage rise in self-employment since 2009, and the number of women in self-employment is increasing at a faster rate than the number of men.

Unlike many politicians, I think this rise in self-employment could be a good thing, at least for those who've made the choice. I welcome the fact that entrepreneurial individuals are trusting themselves and their skills and striking out on their own. Especially amongst older workers, an increased willingness to share acquired knowledge and experience is creating successful small business owners and consultants.

And we've already done a lot to help fledgling businesses get off the ground. Funds providing debt finance of £125m will start lending to small businesses early next year. We've cut corporation tax, capped business rate increases, extended doubling business rates relief, and lowered the burden of employer NICs. We've cut corporation tax rates for small profits and significantly increased access to finance for SMEs. The Red Tape Challenge's 'one in, two out' rule has already led to reforms that have saved businesses over £212 million a year.

If I were a Tory, I'd say all we need to do is slash red tape. But I'm not, so instead I'll say that self-employed people need more constructive help with the multiple reams of paperwork. We should simplify tax returns, offer ongoing effective support, and make sure that HMRC gets all the information it needs with the minimum administrative burden on the individual.

And when the chancellor presents the final budget of this Coalition government, I'd like to see the self-employed being able to hire one assistant without having to pay their National Insurance.

Unlike Ed Miliband, I won't sit around deriding improved employment figures. There are problems we must fix instead of running negative campaigns - for instance, ONS estimates suggest that the average (median) income of the self-employed has fallen by around 22% since 2008, at least in part because many of the self-employed are working fewer hours than they would like. As the economy improves in the years ahead, some may prefer to move back for the security of full-time employment - if so, they will take with them valuable experience of huge benefit to the organisations they join.

On the other side of the coin, however, there is a different issue, of the self-employed working long, hard hours. In 2014 35% of self-employed workers usually worked 45 hours or more per week, compared to 23% of employees. Within that group of long-working self-employed, 13% usually worked 60 hours or more per week against just 4% of people employed by someone else. Clearly these are driven, self-motivated individuals. Many will generate new wealth for themselves and their families, and jobs for others and their families too.

We should applaud and celebrate them. But I think we in government can do something more than that, more practical, to help them create this success.

That includes new measures which mean that self-employed people will benefit from pensions reforms being debated this week. The new single tier pension, masterminded by Lib Dem Pensions Minister Steve Webb, will treat self-employed people fairly for the first time. The Deregulation Bill will seek to remove or reduce regulations identified by Ministers as intrusive or unnecessary, including amending or repealing 182 separate pieces of legislation. And the Lib Dems want to review business rates - a disproportionate burden on smaller enterprises - and cover the option of moving to Site Value Rating within five years and, in the longer term, to Land Value Taxation.

People sometimes tell me the Lib Dems need a "target market" to win an election. They point to the Labour party, which was created by the trade unions and remains a powerful special interest group within it. Or they point to the Conservative party, which has long been dominated by the special interests of the City and big business. As a liberal, I don't believe in governing for special interest groups. The unions have an important role; so too does the City. We should recognise and balance both their needs, but my only "target market" is the British public.

However, there is a group which neither Labour nor the Conservatives speak up for nearly enough - the entrepreneur and the small business. These 'little platoons' - industrious, innovative, rooted in their communities - deserve our support. I want them to be able to look to the Lib Dems and know we speak up for them, offer them the little bit of help which can make all the difference. We need to up our game and I hope that with this Budget we can show the self-employed that we grasp their concerns and we are on their side.