Will Osborne Derail The UK Gig Economy?

November 23, 2015


Wednesday 25th November could be a momentous day for the future of the UK contractor market. Tens of thousands of recruiters and UK contractors will be watching George Osborne’s Autumn Statement with huge interest. Rumours abound that both the contractors and their employers are about to get significantly worse off.

The first significant stealth tax on the rising “Gig Economy” may be on the way.

I realise that this is speculation, and I may be proven wrong. I hope so. However, I’d like to share a couple of Osborne’s potential changes, along with their consequences:

Potential cuts to travel and subsistence allowances for 1.6m UK contractors (to their place of temporary work) will leave millions of temporary workers worse off. This does not only affect well-paid business consultants – it touches construction workers, teachers and nurses, amongst many others. According to estimates, construction workers could lose an average of £6,024 per year and supply teachers on average £3,252 per year. In all markets, this could force the contractors to raise their rates to compensate and equates to a cost of £7bn to their employers.

Crawford Temple, CEO of trade body PRISM, said, “These figures lay bare the huge impact this stealth tax raid by the Chancellor will have, affecting up to 1.6m contractors just as the country gets back on its feet. The overnight drop in take home pay will either mean there are fewer workers willing to travel or rates of pay will have to go up. That burden will be borne by public and private sector employers which will force prices up and deliver worse value for money for the taxpayer.”

According to the Guardian, this could raise £400m for the government, which pales into insignificance if you consider the £7bn cost to business. The government estimates that 100,000 people running their business through a “Personal Service Company” will be adversely affected. For anyone involved in recruitment, it is clear that this number should be a lot higher. Even such a venerable institution as the BBC was affected by this crackdown. Up to 1500 presenters including the likes of Jeremy Paxman and Fiona Bruce were forced to abandon this type of scheme.

The government could also propose that the individual concerned would have to move onto the payroll after a certain time (maybe even as short as one month) thus having to move to a PAYE arrangement and paying NICs. They will place the burden on business and recruitment agencies (rather than the individual) to oversee compliance with the rules. This will send shudders down the spines of many, many people – of that you can be sure.

The “red tape” that this will introduce has the potential to slow dramatically the growth of a vibrant sector of our economy. The “Gig Economy” has helped many people get back on their feet after the recession and has helped the UK service sector drive our return to growth.

This is not a dodgy offshore tax scheme. It is entirely reasonable to compensate a supply teacher if they have to do a 40-mile round trip every day. Most teachers live 5 minutes away from school. There will be people who are taking advantage of the current system, there always are, but as usual, it is the normal folk, who suffer the most. Let’s hope that the rumours are unfounded. We’ll see on Wednesday.

Dear Mr Osborne, don’t bring our powerhouse “Gig Economy” to its knees.

Peter Giltrap, Director EdenGroup