Prime Minister Andy Burnham is facing fresh calls to overhaul sick pay rules for the self-employed, with a leading think tank proposing a mandatory income protection scheme that would guarantee at least £475 a month in benefits. The recommendation comes from Bright Blue, a right-leaning think tank, which argues that the current system is outdated and fails to provide adequate support for millions of freelancers and independent workers.
Proposal for Mandatory Income Protection
Bright Blue's report urges the Labour PM to require all self-employed individuals to enrol in either a private or state-backed income protection insurance scheme covering accident and sickness. Under the proposal, such a scheme would pay out a minimum of £475 per month, ensuring a basic level of financial security for those unable to work due to ill health or injury.
The think tank argues that this change is essential to address the disparities between employees and the self-employed, who currently have limited access to statutory sick pay and other employment protections. According to Bright Blue, the self-employed often fall through the cracks of the welfare system, leaving them vulnerable during periods of illness.
Tax Reforms to Fund New Protections
To finance these enhanced benefits, Bright Blue recommends a gradual equalisation of National Insurance (NI) rates between the self-employed and employees. Specifically, the think tank suggests abolishing employers' National Insurance contributions, merging Class 1 and Class 4 NI, and raising Income Tax to compensate for the changes.
This approach would result in the self-employed paying more tax overall, but employees would see no increase—and under a fiscally neutral model, they might even pay less. The report emphasises that the goal is not to raise additional revenue for the government but to create a fairer system that balances contributions and benefits across all workers.
Think Tank's Vision for a New Deal
Bartek Staniszewski, Head of Policy at Bright Blue and co-author of the report, commented: “Our current system was envisioned at a time when the self-employed paid a little less in tax to receive a lot less in social security.
“Clearly, a new deal for the self-employed is necessary. As our report shows, better protections for the self-employed and fair tax treatment for all would be welcomed by the self-employed themselves all while either raising billions of pounds for HMRC or putting billions back in the pockets of employees.”
The report argues that such reforms could either generate significant revenue for the Treasury or provide a financial boost to employees, depending on how the policy is structured.
Support from Government Minister
The proposals have received backing from Polly Billington MP, Parliamentary Under-Secretary of State at the Department for Energy Security and Net Zero. She said: “Freelancers and the self-employed are the backbone of many of Britain’s fastest-growing industries, yet they are too often overlooked by policymakers.
“Through the work I’ve been doing, I’ve heard time and again about the lack of employment rights, financial security, and tailored support they face.
“This important report from Bright Blue makes a compelling case for ensuring freelancers get the recognition, protections, and backing they deserve as a vital part of our economy.”
Impact on the Self-Employed
If implemented, the proposed changes would significantly improve the safety net for the UK's self-employed workforce, which numbers millions. The mandatory income protection scheme would provide a guaranteed income during periods of sickness, reducing reliance on means-tested benefits and preventing financial hardship.
However, the tax reforms would increase the tax burden on self-employed workers, who already face complex tax rules and limited access to benefits. The think tank argues that the trade-off is worthwhile, as the new protections would offer greater long-term security.
Broader Context and Next Steps
The call comes amid growing scrutiny of workers' rights in the gig economy and the rise of self-employment. Bright Blue's report adds to a wider debate about how to modernise social security for non-traditional work arrangements.
It remains to be seen whether Prime Minister Burnham will adopt these recommendations, but the report's backing from a government minister suggests that the issue is gaining traction within Labour circles. For now, the proposal stands as a blueprint for reforming sick pay and tax systems to better support the self-employed.
