The Association of Independent Professionals and the Self-Employed (IPSE) has called on the Bank of England to issue “clear forward guidance” about interest rates so that already-squeezed independent contracting professionals (and the self-employed more broadly) can properly plan for their financial futures.
IPSE’s plea comes in response to findings in the latest report on the economy from the National Institute of Economic and Social Research (NIESR). The report, which analysed economic data for the second quarter of 2017, is upbeat about the prospects of new economic growth in the second half of the year. However, it also forecasts a three-percentage point rise in inflation by the close of the year.
Drawing from its own study of freelancer confidence, the Freelancer Confidence Index, IPSE emphasised that contracting freelancers and the self-employed more generally are already being hit by rising input prices and input costs. Increases in inflation have a disproportionate impact on this group of flexible independent workers, IPSE said, as they bear the costs of increasingly expensive overheads themselves. Most significantly, they are responsible for purchasing and maintaining their own equipment and have traditionally been willing to travel far greater distances to places of work than salaried employees.
As these costs rise, their traditional means of off-setting them have been largely shut down by recent Government policies. The abolition of tax relief on the typically considerable travel and subsistence expenses incurred by contracting Umbrella Company Employees and other independent professionals has squeezed their incomes, as has rebooted IR35 legislation for those working in the public sector via personal service companies.
Recent research by leading IT jobs board CW Jobs revealed that a majority of public sector IT contractors (71 per cent of those polled) have seen their incomes slashed as a result of being caught by IR35. Many have seen their earnings reduced by 21-30 per cent after being forced to pay employee income tax, despite receiving none of the statutory benefits that these taxes pay for.
Welcoming the NIESR’s forecast of renewed growth following several sluggish quarters, IPSE’s Policy Development Manager, Jordan Marshall, warned that spiralling inflation rates cannot be ignored, especially as they disproportionately affect freelancers and the self-employed.
He added: “With pay remaining stagnant and inflation hiking up equipment and input costs, the self-employed are really feeling the squeeze now. And our Freelancer Confidence Index has shown they recognise this as a serious and growing concern. The Bank of England must do its best to limit the damage and support the self-employed with clear forward guidance about interest rates, thus allowing them to effectively plan their financial futures.”