Simon McVicker is Head of Public Affairs at PCG, the professional association for UK freelancers, contractors and consultants. He is also Chairman of CIPR Public Affairs Group, and a member of Islington South Conservatives.
Yesterday’s leaked letter from the Danny Alexander to George Osborne setting out the findings of his review into all those engaged in the public sector through limited companies, is a cause for concern. According to the Chief Secretary to the Treasury there are more than 2,000 senior UK public officials being paid ‘off payroll’.
This review was commissioned following the high profile exposure of Ed Lester, the head of the Student Loans Company who had been given special concessions to hold his role through his limited company by HMRC. The reaction from certain sections of the press and parliament, following the Ed Lester case, was to assume that anyone engaged on a freelance or contractor basis within the public or private sector was a “tax dodger”, which of course is fundamentally inaccurate.
I am not here to defend Ed Lester’s employment arrangements which were a clear case of false self-employment. Disguised employment wherever it exists should be investigated and stopped, and the laws already exist to do so. However, I am here to urge caution as the Government considers its response to this review.
In his letter to the Chancellor, Danny Alexander stated that he would be able to stamp out all false self-employment within Whitehall within three months. In his rush to satisfy some sections of the media and parliament is vital that Danny Alexander does not ‘throw the baby out with the bath water.’ Yes, some people working within Whitehall and the wider public sector are engaged in false self-employment, but the majority of people engaged on a contract basis within the public sector are not and it is important that the Government makes this clear.
As I said, Disguised employment should be investigated and stopped, but legitimate contractors should be allowed to carry on and not be penalised when they are contributing to the economy, providing value for money for the taxpayer, and providing a necessary skill or service to public sector. Freelancers do not just provide value for money in the public sector; three out of five private sector businesses state that freelancers are vital to their success, and in these gloomy economic times, freelancing is one of the few sectors of our economy that is booming, with growth of 12 per cent in the last three years alone. There are now 1.6 million freelance businesses in the UK contributing a staggering £82 billion to the economy each year.
If George Osborne, whose own review into this area begins in the summer, or Danny Alexander seek to restrict the use of legitimate freelancers in the public sector, they would be doing so in the face of strong public support for the sector. A recent ComRes survey showed that 79 per cent of the public believe that the Government should make it easier for companies to adopt a flexible workforce approach. Indeed it was Richard Lambert when CBI chief who said “labour market flexibility will remain the UK’s real competitive advantage.” Sweeping criticism of the use of contractors and consultants in the public sector undermines this flexibility and could have a significant impact on those contractors who operate within the private sector. More importantly, a significant number of freelancers will likely withdraw their services altogether, thus denying the public sector the benefit of their skills and the value for taxpayers' money that they bring.
I urge Danny Alexander and George Osborne to set aside the media hype and instead focus on supporting a growing sector that contributes significantly to the economy. It is surely in the blood of all Conservatives to support the smallest of all businesses, especially at this time of little economic growth. If they fail to do this and allow themselves to be swayed by a few high profile media stories then they risk creating an anti-business public sector, possibly with a knock on effect in the private sector that would cost jobs and growth in small businesses and freelancing at this crucial time.