Contractors, are the Conservatives still the party of business?

Much of the Conservative Party’s electoral success in recent years can be pinpointed to its focus on the economy and its ability to seduce business, writes Andy Chamberlain, policy director at IPSE.

The party of business - then, and now

The party was seen as the natural bedfellow for entrepreneurs across the UK and seemingly reciprocated this fondness with policies that were considered pro-business and free market.

But the relationship between the current government and the self-employed has soured. Patchy support during the pandemic, particularly for those running a limited company, and the imposition of new tax rules and additional HMRC burdens, have made being ‘in business on one’s own account’ far less desirable.

It is safe to say that many have questioned whether the Conservatives are still the ‘party of business’ – a populist tag they acquired long ago and which still gets bandied about by the mainstream media.

Labour has the edge, as far as the business vote goes

It seems that Labour is now on a concerted drive to steal the support of businesses. Shadow chancellor Rachel Reeves has even gone as far as suggesting that under her watch, Labour will be more pro-business than under Blair.

As Reeves told The Times: “If I become chancellor, the next Labour government is going to be the most pro-business government this country has ever seen.

“More pro-business than Tony Blair’s administration, because I genuinely believe the way to improve living ­standards and to achieve our potential is by unlocking private business investment.”

So is there any way back for the Conservatives at the ballot box when it comes to the self-employed?

How will the self-employed vote at general election 2024?

With our own research (due to be released in May-June 2024) set to show that just one in 300 freelancers feel supported by the current government, it’s unsurprising that many now intend to turn their back on the Conservatives at the upcoming general election.

The Centre for Economic Performance’s latest research pertinently reveals that just 19% of the self-employed intend to vote for the Conservatives at the next election – down from 30% in 2022.

Instead, over one third of the sector (36%) now intend to vote for Labour. Similarly, they are now slightly more likely to vote for the Liberal Democrats, or are otherwise unsure or not planning to vote altogether.

Can government act to thwart this exodus in support?

It may well be too late for the Conservatives win back the hearts and minds of those working for themselves. But it’s worth considering how this current government can placate the sector after years of feeling targeted by rules and burdens that have made doing business as a limited company less attractive.

With parliamentary time rapidly running out, government shouldn’t be afraid to take action on some of the thorniest barriers to work, as there’s a strong appetite among stakeholders to find solutions.

Bolder, more radical action is required

When it comes to the UK’s notoriously complex employment status rules, we’ve seen government drag its feet.

The government rowed back on the previously accepted recommendations of the Matthew Taylor Review. In doing so, the never-ending arguments over tax and employment rights have only continued to clog up our court systems.

There is a vast number of organisations, like IPSE, that are chomping at the bit to engage with government on this issue. Working together, we could come up with a radical solution that could clear this up.

As part of our submission to the Taylor Review, we designed the Self-Employment Matrix. We believe it could be taken forward by government. This would see a clear test introduced to establish whether a work engagement is, or likely to be, one of self-employment.

What is this government waiting for?

Last week, we saw government put out a meagre three paragraph update on their plans for umbrella company regulation.

Despite publishing a hefty consultation document that outlined numerous ideas for regulation of the umbrella market, we’re yet to see any meaningful options taken forward as the parliamentary clock runs down before an election.

This is another area where government has a host of industry experts who have already provided invaluable feedback on any potential plans. Let’s capitalise on this and introduce regulation that actually resolves malpractice by unscrupulous umbrellas.

Start considering the needs of the small business sector

Time and time again we’ve seen chancellors stand up at the despatch box and seemingly forget about the self-employed, or treat them as an afterthought when they introduce measures for employees.

Genuine empathy for the contribution and entrepreneurial drive of the sector has been eroded. We know that the sector contributes an impressive £331 billion to the UK economy each year – so why aren’t they a policymaking priority?

Take government’s plans to make quarterly reporting mandatary as part of its roll-out of Making Tax Digital for self-assessment. This is a policy that purely benefits HMRC’s administration and fails to consider the additional burdens being placed on the self-employed that will effectively have to file multiple tax returns.

Tackling IR35, and getting the economically inactive back to work

Many currently ex-contractors don’t see any value in returning to the labour market, which is only adding to the UK’s growing economically inactive population.

The imposition of the IR35 reforms in both the public and private sector has acted as a barrier to work for many businesses.

Despite our own research revealing the devastating impact of the reforms, the government has failed to acknowledge any problems with the intervention.

Since the imposition of the reforms, we now have 700,000 fewer self-employed individuals operating in the UK; at the expense of UK clients that require flexible talent to grow and ultimately contribute to the UK’s still stuttering economic fortunes.

If this government is serious about encouraging workers back to the labour market, the IR35 rules should be firmly on the chopping block. Not only would this boost the agility of the UK’s workforce, it would also send an important pro-business message.

Final thought

While action on these issues may not be enough to stop contractors and the self-employed from deserting the Conservatives at the next election, it could go some way to putting government back on course.