Philip Hammond's first budget came unravelled but then so did more than one of George Osborne's and several of Gordon Brown's. And it hasn't yet been described as an "omnishambles", as Osborne's was in 2012: though Osborne's U-turn, on a pasty tax, was more comical.
Setting aside election pledges, which I thought was fairly standard but they seem to get remembered more these days, Hammond's primary point that the self employed are probably not contributing enough in tax at the present time, seems to me to be right. Of course, we should be encouraging people to start and build businesses. There has been a boom in self employment since the credit crunch, derided by Labour as the zero hours economy, when surveys show the majority of the people concerned are happy with their positions. This boom has fuelled the record employment stats. Self employed people do have less security, no sick pay and fewer perks. But their state benefits are now pretty much the same as for employees, unlike in previous times - they certainly weren't for my father, who was self employed for nearly all of his long career. But then he didn't have the benefit of an employer's "stamp" (national insurance contribution, youngsters) so had in effect paid in less.
There is also a large army of voluntarily self-employed people, who work with companies who would gladly employ them, but prefer to be freelance. Sometimes that is because they get more fulfilment from working in different environments, even if they stay with one company for a few years at a time. But often the tax advantages of self employment are material, if not the main reason. And generally these hired guns command a day rate that can be double the equivalent employee's salary. Believe me, I have tried to convince many of these guys to join the company full time, but they just could not afford to take the drop in pay. And that is before the tax advantage of paying themselves through their service company, meaning that they effectively pay tax at around basic rate, even though their equivalent salary would not just be higher rate, but sometimes pushing into additional rate (yes, I know that starts at £150k). And I realise that there is a bigger army of self employed people whose earnings are modest and not higher than equivalent full time employees, as was the case for my old man.
But the thing that really gets me going is when public funded bodies (like my bête noire, the BBC) connive with employees to give them more take home pay by encouraging them to go freelance. I realise a lot of their presenters (like Clarkson once upon a time) are genuine freelancers, but they have an army of bureaucrats who are also hired this way. I know this dates back 20 years to (and maybe before) the time of Director General John Birt, who turned out to not be a BBC employee until he switched following much hoo-ha*. And HMRC eventually got its claws into BBC "freelancers" who only ever work at the BBC**. When even some senior civil servants are using self employment as a tax dodge***, I begin to wonder about my belief that the UK is a fundamentally decently administered country, relatively free of corruption. I know this is old news but I doubt it has been rooted out yet. Which is perhaps one of the reasons that Hammond thought it was time to act. And his proposals were "progressive" in terms of hitting higher earnings harder.
The government has called a pause on this issue and punted it into the long grass that lies somewhere over the rainbow, i.e. after an election. Which of course may be sooner than 2020. By then the Chancellor, whoever that may be, will have more freedom to act, because we won't be bound by EU rules. In particular, it should be possible to design taxes which strike a fairer balance between traditional and on line retailers. The Amazons of the world are getting a soft ride - made softer compared with high street businesses by the business rates revaluation. An internet sales charge on goods sold on line would be relatively difficult to dodge and easy for HMRC to collect. And the only reason it hasn't already been done? The EU regulations on VAT preclude member nations from applying different rates to goods sold online and in stores.
I suspect there are many opportunities such as these once we are free from the Brussels yoke (nearly typed yolk....). And once we start to make those changes the EU will surely follow. It may yet be that we will have more influence on EU policies from the outside, by taking action, than being one voice in 28.
Yes, that's me, ever looking for silver linings.
*John Birt's history is on Wikipedia: https://en.wikipedia.org/wiki/John_Birt,_Baron_Birt#BBC_career
**More than 100 BBC stars face tax investigations by HMRC, Independent, October 2016:
http://www.independent.co.uk/news/media/tv-radio/bbc-presenters-hmrc-tax-investigation-self-employment-a7351341.html
***HMRC crackdown on freelance tax dodge used by BBC and civil servants, Telegraph, Oct 2012:
http://www.telegraph.co.uk/finance/personalfinance/tax/9577017/HMRC-crackdown-on-freelance-tax-dodge-used-by-BBC-and-civil-servants.html
Zero hours contracts work for some you are right but they are being used by some companies to exploit workers who in effect are regular employees but are certainly not treated as such and who don't have the employment rights they should be entitled to.
ReplyDeleteOn Brexit and Hammond's hands being tied, me thinks you grasp at straws here as freedom to do much with little is hardly freedom in my view.