A new proposal backed by Andy Burnham aims to extend sick pay, parental leave, and Universal Credit to the UK's five million self-employed workers. The plan, outlined in a report by the Bright Blue think tank, suggests overhauling the National Insurance system to fund these benefits, potentially closing a £10 billion tax gap.
Key Recommendations of the Report
The report, released today, calls for scrapping employer National Insurance contributions entirely. Instead, it proposes equalizing the National Insurance rates paid by employees and the self-employed, setting them at the lower rates currently enjoyed by those who work for themselves. This change would generate additional revenue to finance a more comprehensive safety net for self-employed individuals.
Under the proposal, self-employed workers would gain access to statutory sick pay, parental leave, and Universal Credit, as well as state-funded pension contributions. Currently, the self-employed do not qualify for statutory sick pay or maternity allowance, and research from the Social Market Foundation indicates that only one in five self-employed people actively saves into a pension.
Political Reactions and Criticism
Kevin Hollinrake, chairman of the Conservative Party, has voiced strong opposition to the plan. He argued that risk-takers and founders should not be "loaded" with higher taxes to fund a bigger safety net. Hollinrake stated: "Diluting the reward by hiking National Insurance and income tax on the self-employed, while expanding state provision around them, doesn't make Britain more entrepreneurial. It makes self-employment look more like a worse-paid version of being an employee, with none of the upside."
In contrast, Polly Billington, Labour MP for East Thanet, expressed support for the measures. 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 freelancers face."
Financial Impact and Tax Gap
The think tank's recommendations stem from the fact that self-employed workers earn an average of £23,300 per year. They currently pay lower National Insurance contributions than their employed counterparts, resulting in a tax gap of approximately £10 billion annually compared with if they paid equal rates. Equalizing these rates would provide the necessary funding for the expanded benefits.
The proposal has sparked debate about the balance between supporting self-employed workers and maintaining incentives for entrepreneurship. While proponents argue that the current system leaves millions without basic protections, critics warn that higher taxes could discourage people from starting their own businesses.
Broader Context and Next Steps
This proposal comes amid ongoing discussions about the future of work and social security in the UK. With the rise of the gig economy and freelance work, policymakers are grappling with how to adapt traditional employment protections to new working patterns. The Bright Blue report adds to a growing body of research calling for reforms to better support self-employed individuals.
As the government considers its next steps, the proposal is likely to fuel further debate in Parliament. For now, self-employed workers and business groups will be watching closely to see whether these recommendations translate into concrete policy changes.
