Ed Balls can't ignore the growing ranks of people working for themselves. Photo: Getty
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Labour need to address the self-employment problem

Of all workers in the UK, over one in every seven is self-employed. Labour should account for this in its economic proposals.

In the early years of the coalition government, Labour had an easy argument to trot out. The route to economic recovery was painfully slow, and all the talk was of double dips and possible triple dips. When the recovery (and some happy revisions to the economic statistics) finally happened, Labour had to start talking about living standards instead. This was a risky strategy – there was a fair chance that the cost of living problem could have evaporated by now.

Unluckily for the rest for us, but luckily for Labour strategists, the argument still holds. The recovery hasn’t yet been strong enough to raise GDP per capita to what it was before the crisis. Wages grew by 0.7 per cent in the past year. Over the same period, prices rose by over double that – 1.6 per cent. Prices have been going up faster than regular wages in every quarter of every year since 2009. Around 1 in 5 working people are in low pay. Labour say we can’t carry on like this.

This has felt like safe territory for Labour – a policy without a big spending commitment price tag. Ed Balls has already talked about increasing the minimum wage, ending zero-hours contracts, and encouraging more firms to pay a Living Wage – a wage level that allows workers to meet basic living costs. The logical next step now, eight months before the election, is to set out some specifics. Ahead of the start of the Labour party conference this week, Ed Miliband has been busily doing interviews talking about a new pledge to raise the minimum wage to £8 per hour by 2020.

The lack of growth in wages is a real one, and needs to be addressed. But – should Labour find itself in government in 2015 – it will need to tackle the underlying cause, and not the superficial symptom. Getting strong, sustainable growth from businesses will mean that businesses will be able to afford to pay more. That will take investment in skills, infrastructure and innovation.

But there is an even bigger problem than this. The debate about policies like the minimum wage seem to take place in a nice neat world where most people neatly fit into a box labelled “employee”, and most firms are of a reasonable size. It’s neat, because it means that government can help workers by leaning on employers to improve conditions or raise wages – whether by regulation or through tax incentives. But it is becoming harder and harder to believe that this reflects the reality of the new world we are in.

Of all workers in the UK, over one in every seven is self-employed. Among men in work, the figure is even higher – almost one in five men in work are self-employed. In the last year, the numbers in self-employment grew around five times faster compared to the numbers working as employees.

These people will not be touched by increases in the minimum wage – the minimum wage does not apply to the self-employed. And if the minimum wage rises at a rate that businesses cannot afford, we may find that it isn’t the unemployment figures that go up: more people may effectively be pushed into working at what is effectively a lower hourly wage rate in self-employment instead. Almost a quarter of those living in in-work poverty are in households where at least one person is self-employed. To ignore these people would leave a gaping hole in any strategy for tackling low pay.

This is not to say that self-employment should be discouraged. Among the ranks of the self-employed are many success stories. For some, it may well be a route to greater freedom and higher income, and that is a good thing. More self-employment may well help create a more flexible, productive economy. But if Labour is serious about tackling low pay and increasing economic growth, it can’t carry on ignoring the growing ranks of people working for themselves. Politicians need to reflect the new reality of the working population. 

Nida Broughton is chief economist at the Social Market Foundation

Nida Broughton is Senior Economist at the Social Market Foundation.

Photo: Getty
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The Home Office made Theresa May. But it could still destroy her

Even politicians who leave the Home Office a success may find themselves dogged by it. 

Good morning. When Theresa May left the Home Office for the last time, she told civil servants that there would always be a little bit of the Home Office inside her.

She meant in terms of its enduring effect on her, but today is a reminder of its enduring ability to do damage on her reputation in the present day.

The case of Jamal al-Harith, released from Guantanamo Bay under David Blunkett but handed a £1m compensation payout under Theresa May, who last week died in a suicide bomb attack on Iraqi forces in Mosul, where he was fighting on behalf of Isis. 

For all Blunkett left in the wake of a scandal, his handling of the department was seen to be effective and his reputation was enhanced, rather than diminished, by his tenure. May's reputation as a "safe pair of hands" in the country, as "one of us" on immigration as far as the Conservative right is concerned and her credibility as not just another headbanger on stop and search all come from her long tenure at the Home Office. 

The event was the cue for the Mail to engage in its preferred sport of Blair-bashing. It’s all his fault for the payout – which in addition to buying al-Harith a house may also have fattened the pockets of IS – and the release. Not so fast, replied Blair in a punchy statement: didn’t you campaign for him to be released, and wasn’t the payout approved by your old pal Theresa May? (I paraphrase slightly.)

That resulted in a difficult Q&A for Downing Street’s spokesman yesterday, which HuffPo’s Paul Waugh has posted in full here. As it was May’s old department which has the job of keeping tabs on domestic terror threats the row rebounds onto her. 

Blair is right to say that every government has to “balance proper concern for civil liberties with desire to protect our security”. And it would be an act of spectacular revisionism to declare that Blair’s government was overly concerned with civil liberty rather than internal security.

Whether al-Harith should never have been freed or, as his family believe, was picked up by mistake before being radicalised in prison is an open question. Certainly the journey from wrongly-incarcerated fellow traveller to hardened terrorist is one that we’ve seen before in Northern Ireland and may have occurred here.

Regardless, the presumption of innocence is an important one but it means that occasionally, that means that someone goes on to commit crimes again. (The case of Ian Stewart, convicted of murdering the author Helen Bailey yesterday, and who may have murdered his first wife Diane Stewart as well, is another example of this.)

Nonetheless, May won’t have got that right every time. Her tenure at the Home Office, so crucial to her reputation as a “safe pair of hands”, may yet be weaponised by a clever rival, whether from inside or outside the Conservative Party. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.