Was the budget one big fudge?

I sat and listened to every word of Phillip Hammond’s Budget yesterday. It was well delivered and contained a few funny lines, although they might have been funnier had his speechwriters decided that they shouldn’t all have been personal attacks on the people siting opposite him. Why does politics always have to resort to the petty?

Anyway, about what he said rather then the way he said it. He delivered what many have called an attack on ‘white van man’ with the news that National Insurance contributions would increase from 9% to 11% one the next two years. This has been seen as a horrible attack on the self-employed who, according to many commentators, are the entrepreneurial backbone of this country.

I’m not so sure.

We could argue all day about whether those who are self-employed have become so out of necessity or because they liked the freedoms that truly being self-employed allows.

But I think that the Chancellor deliberately obfuscated things yesterday, and he certainly didn’t do a very good job of explaining the reasoning behind his decision to increase National Insurance contributions.

He talked about ‘fairness’ and he said that the self-employed now receive the same pension benefits as the employed and they use the same public services so why should they pay so much less in National Insurance.

That’s true, but what he didn’t go on to say is that the self-employed don’t have the same job security as many employees and don’t benefit from the same sick pay, holiday pay or pension help as employees.

But even if you factor all of this in I still think that he missed the point, or probably more importantly, decided not to labour the point.

And the point is that thousands, if not hundreds of thousands, of people who are classed as self-employed today are not really self-employed at all. Someone tells them when to work, where to work , and what to do when they go to work.

These things generally make a person employed and the only reason they are self-employed is so that companies can duck out of their responsibilities as an employer, and amongst other things avoid paying the very National Insurance contributions that Philip Hammond moaned about yesterday.

A huge number of our self-employed should be working for a company, and receive all of the protection that this entails, and this should be the focus of the Chancellor’s attention.

He also decided to reduce the amount of tax-free dividend from £500 to £2000. a really strange move given that this was only very recently introduced. But if you look at the bigger picture it’s part of the same move to change the way we will all be working in future.

Many people who will pay dividends do so because they have set up a service company of which they are the only employee and director. They pay themselves a small salary, usually just below the income tax threshold, and then the rest of their income comes as dividends. Once again many of these people should be employed by the company that pays their fees, in many cases only one company and in many cases, and for the reasons given above, they should really be employed by that company but are not for the other reasons already mentioned.

This is the real issue the Chancellor should be addressing. He knows it and I think he is beginning to address it but he should be honest and tell us all what he is doing.

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