Industry experts drawn from the staffing industry and the professional contracting community have given a qualified welcome to Chancellor Phillip Hammond’s announcement this week that his proposed two per cent hike in Class Four National Insurance Contributions will be suspended.
The chorus of condemnation from industry experts about the tax hike for self-employed workers, which include many contracting professionals, morphed into a mounting backlash among Tory backbenchers. Prime Minister Theresa May is understood to have responded to this by forcing the Chancellor’s hand. The result was his humiliating climbdown on Tuesday. In an open letter to Tory MPs, Mr Hammond stated: “There will be no increases in…rates in this Parliament.”
While the experience has been personally bruising for the Chancellor, concerns remain that the proposal has not actually been pronounced dead.
The founder of specialist insurance and technology recruiter Gravitas Recruitment Group, Jonathan Ellerbeck, welcomed the U-turn but sounded a note of caution. He said: “In the short term, it’s nice to see the Prime Minister has listened to other members of her party to put it on hold. However, as with most things, once it’s been raised on the agenda, I don’t think it’s going to disappear; I think it’s just going to be delayed.”
Dave Chaplin, the founder and CEO of Contractor Calculator, an online advice portal for freelancers and contractors, said that he is amazed to see a Conservative Government breaking a manifesto commitment. It is, he said, hardly surprising to see them forced into a U-turn.
Noting that many people actively choose to take the risk and launch out as self-employed workers, he added: “[T]here are still those in false self-employment, and the Government needs to focus on clamping down on firms that force vulnerable workers into low-paid self-employment due to the inequality of bargaining power they have as workers.”
Julia Kermode, CEO of Umbrella Company trade association the Freelancer and Contractor Services Association (FCSA), expressed relief that the Government has demonstrated some “common sense” and belatedly appreciated that its argument that the tax hike would “level the playing field” between the employed and self-employed was, as Ms Kermode stated previously, “flawed.”
Meanwhile, Daniel Callaghan, CEO of independent consultants’ platform Talmix, welcomed the Chancellor’s change of mind and emphasised the talent and operational advantages that businesses benefit from when able to access the skills of a pool of contracting professionals.
He warned that increased taxes and bureaucracy would limit the ability of these professionals to grow and contribute across numerous businesses, ultimately harming the country’s productivity while simultaneously demonstrating an outmoded understanding of clear changes in the contemporary world of work.