Will Starmer’s back-to-work plan succeed? Not without the self-employed

By Fred Hicks Senior Policy & Communications Adviser at IPSE - The Self-Employment Association

Another government, another ‘back-to-work’ plan. Yesterday, the Prime Minister unveiled his government’s approach to the UK economy’s own ‘long-covid’ symptom – a smaller workforce. Whereas economies across Europe have seen their employment rates recover or even exceed pre-pandemic levels, the UK’s struggling labour market remains a persistent outlier.

It’s a problem that the last Conservative government tried, and ultimately failed, to make a meaningful dent in. Sir Keir Starmer now has a chance to turn over stones that his predecessors left unturned. It’s encouraging that the Prime Minister has made tackling this issue an early priority for his government.

Within the White Paper is a fig leaf to “review the existing offer of support for the self-employed and consider whether it should be enhanced.” It’s only a shame that government’s thinking in this area hasn’t developed further than this – not least because IPSE has been making the case for this to happen for quite some time.

Making the case for freelancing

There’s no doubting that very many of those currently out of work for an extended period will be best served by securing an employed role with a supportive employer. But having a wholly employment-centric approach leaves so much potential on the table.

The UK’s self-employed population has been marooned at a relatively low 4.3 million since the pandemic took hold of the economy, falling by approximately 700,000 from its peak. This is in stark contrast to the decade of continuous growth in self-employment we saw throughout the 2010s, marked by an upsurge in women starting a self-employed business.

For a multitude of reasons, the appeal that self-employment had to millions of extra new joiners in the 2010s seems to have faded in the 2020s. But this back-to-work plan, like those before it, still isn’t facing this awkward reality head on. This is a shame, because there’s much to be gained by being more positive about self-employment.

We know that freelancing is now providing vastly more work opportunities for groups who often face barriers in the world of work including mothers, up 59% since 2008; people with disabilities, up 72% since 2013; and those with caring responsibilities, of which there are as many as 445,000 according to IPSE research published just last week.

For all of these groups, the flexibility that self-employment offers is seen as one of the key benefits of working in this way, enabling them to manage other priorities with autonomy and independence.

We know that at least two in five (42%) self-employed professionals have worked for themselves for at least a decade or more, showing that freelancing is already providing fulfilling, sustainable careers for millions. Of course, not all self-employed ventures will last this long; but if a chance to foray into freelancing arises, and this gets someone back into the world of work, our job centres should be equipped to help people seize it.

What help do people want before going self-employed?

We know from previous IPSE research that as many as 28% of people already in employment could see themselves going freelance in future. However, there were some areas that they felt they would want help with before doing so; business planning, financial planning and help with tax being the clear front runners.

Should it be the task of a new ‘jobs and careers service’ – the successor to today’s Jobcentres under government’s plans – to help people with these things? A small amount of help is feasible, not least because government already publishes advice for writing business plans and starting a business online. It also sponsors public services like MoneyHelper, which offers advice for self-employed tax and financial planning, including the midlife MOT.

What’s potentially missing is a willingness to direct people to these services and meaningfully support them through the process of moving from universal credit and into freelancing – or at least taking on their first freelance gig. But the ‘minimum income floor’ in universal credit, which effectively penalises self-employed incomes and can leave people worse off once they begin winning work, still has the potential to get in the way.

At the other end of the scale, many veteran freelancers felt compelled to down tools and stop working altogether after being overwhelmed by crushing reforms to the IR35 rules. If government does plan to expand the role of self-employment in alleviating Britain’s inactivity problem, winning these individuals back must surely be part of the solution too; not least because the clients they used to work with are clamouring for the rules to be overhauled so that they can – to coin a phrase – get back to work.