Below is the text of the speech made by Meg Hillier, the Labour MP for Hackney South and Shoreditch, in the House of Commons on 19 May 2020.
I think it is fair to say that covid-19 has shone a light on the different ways of working. Whether it be freelance work through personal service companies, which are often set up to deal with insurance and liability, or freelance work via short-term pay-as-you-earn contracts, many of these people are falling through the net. That does not even begin to embrace those who are in insecure, zero-hours work. Many in my constituency work four jobs over seven days just to make ends meet, while others earn enough to work a four-day week and can live quite comfortably.
Hackney South and Shoreditch is a microcosm of all the different ways of working, some of which the Chancellor has supported in his package, and some of which he has not. It is also a hub of innovation, particularly in the tech area in Shoreditch, in the creative industries. We are proud to be the home of many disruptor businesses that start off trying to change the way things work.
This motion brings to the fore a number of issues. Contractors providing a flexible, agile workforce allow many of the businesses in my constituency to buy in the skills they need when they need them. Those are typically high-cost skills that a business could not put on the payroll, especially at the start-up stage. Businesses have been in touch with me about this measure for that reason in particular. They would not be able to create a full-time job. They do not need this expertise full time, long term on the payroll. They need to be able to hire someone quickly, and if the company does not succeed, there is no direct impact on the careers of the people they have hired for that short contract because they go on to the next contract. It allows start-ups to get the help, support and technical skills they need as a fledgling business.
Since the Government announced the extension of IR35 to the private sector, many companies in my constituency have already taken the view that they need to move overseas, and many of the individual contractors are moving overseas. They often work in different countries anyway, so where they are physically based is less of an issue than it may seem.
Many of the companies that are employing those contractors are taking a very risk-averse approach, designating all contractors as needing to go under the IR35 umbrella. That is having a negative impact on those technically skilled individuals who would be available for work but will end up being employed for tax purposes only, with none of the perks. In pursuing the national insurance contributions of employers, the Government are in danger of throwing out the baby with the bathwater. No one wants to see tax avoidance on a huge scale, but this system has grown up and helped to generate a whole business sector that relies on this flexibility, and the employees caught up in this will have none of the benefits of employees but will be working alongside people who do.
The issue of national insurance contributions is really important in terms of the Government’s review. We need to know exactly what the timetable is for that review, who will do it and how they will calculate the tax take. Many businesses are presented with evidence, which I am happy to share with the Minister, about why the tax take will not actually increase for HMRC by going down this route. It is really important that we get those fundamental numbers right. Is the research commissioned yet? How will be people be able to contribute, and will it look at the overall tax rate? The delay of a year is welcome, but I completely agree with the right hon. Member for Haltemprice and Howden (Mr Davis) that we are going into an economic contraction, the likes of which this this country has never seen before, and a year is not long enough. We need to delay this further or we will lose these skills, and businesses will not replace these roles as employees, so we will have a double whammy in the economy.