The government won’t be making changes to the self-employed auto-enrolment anytime soon, as it is too expensive, argued Matthew Taylor.
The former Labour adviser and author of the government's review of working practices in the modern economy said today (11 October) that it “seems logical that we should move to a world where I pay more for self-employed labour, and some of that top-up would go to incentivising people to save for pensions or for sickness."
Speaking at a joint hearing of the Business, Energy and Industrial Strategy (BEIS) and the Work & Pensions select committees, Mr Taylor said: “I suspect that because of the fiscal situation, and also because of the push back the chancellor had when he put his proposals in his Budget earlier in the year, [it] will be quite difficult to talk about measures in the short-term [for self-employed auto-enrolment].”
Chancellor Philip Hammond ditched plans to increase national insurance contributions for the self-employed earlier this year in a humiliating U-turn just a week after the measure formed the centrepiece of his first Budget.
The chancellor signalled the abrupt change of heart in a letter to Conservative MP Andrew Tyrie, then chairman of the Treasury select committee, following a revolt by backbench MPs that Mr Hammond had proved unable to quell.
The government is currently reviewing auto-enrolment, with a report expected to be publish before the end of the year.
Pension minister Guy Opperman has recently confessed that “there is no simple solution” for including self-employed people in auto-enrolment.
In its own review, Mr Taylor concluded that effectively auto-enrolling self-employed people into a pension through the self-assessment tax process would help to deal with the issue of this type of worker failing to set cash aside for retirement.
Providers Aviva and Royal London have suggested a similar possibility, including the chance for the self-employed to opt out of the contributions.
Mr Taylor explained before the committees that he wanted to make a “connection in the review between the fact that we should be paying more tax for self-employed labour and the fact that we should probably be investing more in the entitlements of self-employed people,” such as pensions.
He said: “There was quite a strong push back from the [HM] Treasury on that, partly because of the implications of it, and partly because of the view that self-employed people make a choice.
“If you chose to be self-employed, you don’t get the benefits that you get from being an employee.”
According to Mr Taylor, HM Treasury believes that it would be a ‘slippery slope’ if the government started taking on employer responsibilities in relation to various protections and entitlements for self-employed workers.
He said: “I understood that, but on a political level I’m attracted by the idea that if we paid a bit more for self-employed labour, that would create a sum of money, which could be used in part to improve the protections, particularly on pensions, for self-employed people.”
“You can join auto-enrolment if you are self-employed, but the problem is that there is no incentive to do so, because there is no employer contribution. Over time, we should explore changing that.”
maria.espadinha@ft.com
