You don’t need me to tell you that things are tough out there for small businesses. I know: having run several small businesses and having previously been our party’s Small Business spokesperson. The UK’s 4.5 million Small and Medium Enterprises (SMEs) make a huge contribution to our economy, but today they are caught in a perfect storm between contracting markets, a failure of banks to lend, and late payments. The result of these problems is that many viable small businesses have sadly failed.
There is however one sector of small business that is growing. Over the last three years we have seen an increase of 12 per cent in the nation’s smallest businesses. Freelance businesses may be small but they make a growing contribution to our economy, currently standing at £21 billion of value added each year.
Estimates suggest that up to 10 per cent of the EU’s workforce are now classified as independent or freelance and there has been a staggering 82 per cent increase in the number of such workers across the EU over the last ten years.
I am proud to say that while other political parties have often ignored freelancers in the past, the Liberal Democrats have not. Two years ago my then Liberal Democrat colleague, Liz Lynne MEP, established a forum at the European level for independent professionals and freelancers, and last week Liberal Democrats from across the EU went one step further by launching a dedicated manifesto full of policies aimed at boosting the EU’s 23 million SMEs.
Recently the freelance sector has come under attack in the UK; particularly those freelancers who operate in the public sector. This is largely due to the recent high profile exposure in the media of Ed Lester, the head of the Student Loans Company, who had been given special concessions to hold his role through his limited company by HMRC. Much of the media have reported this story with a deeply concerning tone, making claims of “tax dodging” and avoidance, leading to some journalists and politicians even questioning whether it is acceptable for people to operate as small or one person limited companies within the public sector.
Now I am not defending Ed Lester or the Student Loans Company in any way; it seems to me that this may actually have been a case of false self-employment and believe that wherever such cases exist they should be investigated and dealt with accordingly.
And I think it’s important that we should not let one high profile media exposé blind us to the reality. The fact is the overwhelming majority of the UK’s 1.6 million freelancers run legitimate businesses. These people make a vital contribution to our economy, provide value for money to the taxpayer, and give the necessary skills and services needed for both the public and private sectors to call upon as and when they are needed.
My colleague Danny Alexander has now launched a review into all those engaged in the public sector through limited companies. I feel the report is necessary to look at the issue of freelancing in the public sector in more detail if we are to move forward from the Ed Lester example. Hopefully it will enable the veil of suspicion to be lifted from the majority of freelancers working in the public sector who we should be proud of, and root out the minority of bad apples who should actually be on the public sector payroll as full time employees.
It’s important that as work on the Danny Alexander review continues, the focus remains on the bigger picture and not on one or two high profile examples in the press. It would be a big mistake to undermine the UK’s own flexible independent professionals when other countries are seeing a rapid growth in such workers. Of course false self-employment should be tackled and the laws already exist to do so, but the contribution the overwhelming majority of legitimate freelancers make to the flexibility of the UK labour market and the economy as a whole should not be hampered.
In these difficult economic times let us show that the Liberal Democrats in Government as well as in Europe are still very much on the side of the UK’s smallest businesses.