Empowering the Freelance Economy

Labour Party pledge to “hardwire the voice of small business into government” not in sync with Rayner’s call to ban zero-hours contracts

Angela Rayner's good intentions for gig workers could backfire on the solo self-employed
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OPINION

Shadow Chancellor of the Exchequer Rachel Reeves says the Labour Party, if voted into power next year, will appoint a Covid Corruption Commissioner to recover £7.2bn lost to COVID-era waste and fraud. The Labour Party also claims it will “hardwire the voice” of small business into Government. But the Party’s headline-grabbing proposals to ban zero-hours contracts could “shackle” freelancers with more legislation and less freedom to work for themselves


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The Labour Party hosted its first Small Business Sunday on 8 October at the Labour Party’s annual conference in Liverpool – with a promise that the voice of small business will be “integral to a Labour government”.

The event – which was claimed to attract hundreds of small businesses from across the country, as well as the Federation of Small Businesses and British Chambers of Commerce – is one way that the part is attempting to demonstrate its commitment to SME growth.

If the Labour Party would in fact “celebrate the contribution of small businesses” and “allow their voice to be at the heart of the party’s mission for the UK to have the highest growth in the G7,” then what would that look like? Potentially confusing given that some of the messages coming from Labour are in conflict with what the freelance economy really needs to grow.

Labour has previously set out ambitious plans to support small businesses, including:

  • replacing business rates with a system for the 21st century;
  • action to tackle the scourge of late payments;
  • creating a level playing field for smaller firms to access public contracts.

Labour says for the first time it will ensure that procurement measures boost social enterprises, such as Homebaked in Anfield, a local bakery that reinvests in community projects.  

Opening the event, Jonathan Reynolds MP, Shadow Secretary of State for Business and Trade, said, “Listening to the voice of small business is integral if the next Labour Government is to succeed. That is why Labour will ensure small business is represented on the Industrial Strategy council.  

“With Labour, small businesses will get the firm economic foundation they need to thrive, with action to tackle late payments, business rates reform and make it easier for small businesses to win public contracts.” 

Tina McKenzie, Policy Chair, Federation of Small Businesses said: “Tackling late payment and business rates is exactly what small businesses are looking for – while opening up public procurement will see Government itself benefit from the talents of all those working in small businesses across the country.”  

Self-employed feel “trapped”

As much as these promises are welcome, nearly half of self-employed workers would switch to a salaried job if they could keep the same income, and one in eight would even take a 20% pay cut. That’s according to a report called “The self-employment trap,” published by the Centre for Economic Performance (CEP) at the London School of Economics and Political Science (LSE). The findings reveal that stagnant incomes and rising costs are having a negative impact on the well-being of self-employed workers.

Our analysis of voting intentions shows that, unusually, it is the older self-employed who are switching from Conservatives to Labour. This willingness to shift political allegiance implies that the self-employed cannot be ignored in the manifestos of the political parties.

Maria Ventura, CEP
  • Self-employed workers are facing financial challenges. 34% are having trouble paying for basic expenses, and energy bills are the most challenging issue.
  • Many self-employed workers are considering switching to salaried jobs. 40% would switch to a salaried job if they could secure the same income, with many solo self-employed and younger individuals willing to accept a wage cut.
  • Self-employed workers are feeling trapped. Many feel that the rewards of self-employment are not worth the risks, and they are struggling to find salaried jobs with similar pay.
  • Self-employed workers are considering voting for Labour. Labour is now the most popular single party among self-employed workers, according to the CEP report, with many older self-employed workers switching from the Conservatives.

Stephen Machin, director of CEP says the self-employed, especially the solo self-employed working by themselves, are experiencing “ongoing challenging financial conditions.”

Many self-employed people in the UK appear to be questioning whether the rewards involved in being self-employed are worth the risks.

Maria Ventura, a co-author of the CEP report says, “Our analysis of voting intentions shows that, unusually, it is the older self-employed who are switching from Conservatives to Labour. This willingness to shift political allegiance implies that the self-employed cannot be ignored in the manifestos of the political parties.”

Rayner does not appear to have got the memo. Shackling the flexible workforce with more legislation impedes growth. Labour needs to support people who want to be their own boss, and not put more friction in the way

Dave Chaplin, CEO ContractorCalculator

If Labour bans zero-hours contracts, then what?

Angela Rayner reiterated her pledge to ban zero-hours contracts at the Labour Party Conference on Sunday, but according to some, that could just add to the freelance economy’s existing problems.

“Banning zero-hours contracts glosses over the nuanced realities of the modern employment landscape,” said Dave Chaplin of ContractorCalculator.

“Angela Rayner fails to grasp the complexities of atypical work arrangements preferred by some workers and whilst an outright call for a ban makes for an easy headline, it is poor policy and the reality is far more complicated.  Whilst such contracts are open to potential abuse which must, of course, be tackled, when used properly, zero-hours can provide flexibility for both businesses and many workers,” said Chaplin.

Chaplin said zero-hours workers are “just part of the picture and one part of a wider group of flexible workers.”

“The self-employed workforce, contractors and freelancers, who have chosen to be their own bosses, do not want benefits and do not want rights,” he said. 

He continued, “These are a group of professionals and entrepreneurs who should be supported and not punished by red tape and administrative burdens, such as the punitive IR35 legislation so that they and the businesses who rely on them can thrive.”

Chaplin says Keir Starmer wants to promote growth and the UK’s flexible workforce can be relied upon to help with that growth.

“Rayner does not appear to have got the memo,” he said. “Shackling the flexible workforce with more legislation impedes growth. Labour needs to support people who want to be their own boss, and not put more friction in the way.”

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