Scotland's Economy Westminster Mismanagement

Budget proves the Chancellor doesn’t understand the changing nature of work

When I think back to when I started my work-life the world was a very different place. Then, if you had less than five years in a job on your CV, you had to explain the reason at the interview, apprenticeships still existed, and when you got a job in a factory it was for life. In blue-collar jobs your father or mother often worked for the same company, and work was work, and completely separate from your personal life.

My route into the job market was via university. I landed a plumb position with US giant Proctor & Gamble (Pampers, Gillette, Febreeze, Tropicana, Pringles, Duracell, Fairy, Head and Shoulders…) but I was in for a shock. White collar jobs in American companies weren’t like ours: the pressure was on, you worked till you dropped, and you were actively encouraged to talk about your salary so that others knew they had to up their game. No one has ever bettered the term “rat race” for this environment. Nowadays a dwindling number still work in factories or offices where, when the shift ends, you leave work behind. Others, especially those in junior posts in the professions, will still be engaged in the rat race but in less than a generation a fundamental shift in how we work has changed the nature of employment for most people.

They call it the gig economy. Gone are the long-term contracts, the pensions, the security of the monthly wage, as people choose – though some are forced – to be part of the gig economy. The term comes from the gigging musician, as companies looking to cut costs can outsource to low-skilled workers more effectively than they can keep them on the books. They can also decide not give them work and avoid redundancy payments if business drops. Uber drivers are self-employed and many hairdressers rent space in a salon and are not being paid a wage. Deliveroo riders and others are on zero-hour contracts, and many with technical expertise feel they can make more money gigging than working nine to five. Even if they can’t work from home, being your own boss and having more time for family and socialising can make up for having less money. Some economists say someday all work will be temporary and part time, and they may be right. It can’t be denied that working for yourself is one of the fastest growing employment sectors in the western world.

Successful self-employed people often get to a size where they take on employees and grow their company. Self-employment is now seen as the easier route into entrepreneurship and so the new entrepreneurship is one of the biggest opportunities for economic growth. Taking that step up is hard and financially dangerous for most and the Budget cutting the entrepreneurs’ dividend allowance from £5,000 to £2,000 next year means they will earn less in a far riskier pre-Brexit environment. This move is nothing less than an assault on our nascent entrepreneurial and small business culture by a government that turns a blind eye to big corporate tax avoidance.

In the UK there are over 4.7 million self-employed while in Scotland 330,000 people are self-employed, amounting to 10 per cent of the Scottish workforce – a rise of nearly 35 per cent in a decade. Traditionally, men make up the majority of the self-employed – builders, plumbers carpenters, landscapers – but the fastest growth area is in female self-employment, which is up nearly 50 per cent in the same period.

So it’s hard to see how the Chancellor can justify bringing national insurance contributions (NICs) for the self-employed into line with employed people. The idea is that with more people being self-employed less revenue is collected, which is true, but self-employed people take far higher risks than employed people and are most at risk from economic downturns, not to mention that more experienced people leaving paid employment opens up opportunities for younger people. Raising NICs for the self-employed to 10 per cent in 2018 and 11 per cent in 2019 makes starting up a business less attractive.

David Cameron made a manifesto promise that there would be no increases in NICs, VAT or income tax in the current parliament. So not only is this a broken promise, it makes self-employment less attractive and will stifle the new emerging route to entrepreneurship and growth. Not only that, it may have the opposite effect to the one intended and generate less revenue for the Exchequer. Ever had a builder offer you a cash-only price? Had your haircut in a barbers that is cash only? Many self-employed have the opportunity to avoid declaring income and this will encourage more people to operate in this way. Ah, but that’s unethical and illegal. Yes, but last week I explained how Nissan UK sells all the 500,000 cars it makes every year to its Swiss operation and only pays 10 per cent tax, thus avoiding hundreds of millions of pounds in UK tax, but this is seen as legal and ethical. The UK Government is slowly but surely moving the tax burden from corporations on to ordinary people. Big banks are bailed out, oil companies are told to pay no tax (specifically damaging Scotland’s financial position) and big corporations transfer goods ownership or profits via fancy licensing deals to lower tax locations, costing the Treasury billions. So the government cuts corporation tax and increases the tax burden on the self-employed in response to lower tax receipts – but why not close the tax-avoidance loopholes? To be fair, the Tories have raised the amount people can earn before paying tax.

However, that sop to the workers, along with the fake Living Wage, however welcome to everyone who benefits from it, hides the fact that they are just papering over the cracks in society caused by their semi-religious belief that big business is everything and that their right-wing economic philosophy which insists that small government and low tax for corporations will create a trickle-down effect when all the evidence is to the contrary.


About the author

Gordon MacIntyre-Kemp

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before becoming CEO of Business for Scotland Gordon ran a business strategy and social media, sales & marketing consultancy.

With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G).

Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and Believe in Scotland.

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