The virus in our political and economic systems - Part 1

Author: Mark Harvey

May 12, 2020

In the 1892 a cholera epidemic struck in the heart of Germany. Two neighbouring cities, Altona in Prussia, and Hamburg, a Free City, witnessed hugely disparate levels of mortality. In a masterful analysis, Richard Evans analysed the sociogenesis of this epidemic (Death in Hamburg, Penguin, 1997). Altona had invested in its public water infrastructure, regulated its medical profession, believed in the microbial theory of disease (Robert Koch), and had already required mass vaccination for smallpox. It escaped significant cholera deaths. Hamburg championed the free market, refused public infrastructure investment, believed in a miasma theory of disease beyond political intervention, and rejected medical regulation and smallpox vaccination. Tens of thousands died, striking especially the poor and the service class working for the merchant elite. Ring any bells?

Pandemics test out the fault lines in our political and economic systems. And in the not-so United Kingdom, there are plenty of fault lines, resulting in now the highest level of deaths per capita in Europe. I will briefly pick out just two, first bogus self-employment where the pandemic has resulted in the threat of instant destitution. The second, to follow, is about care homes which are witnessing catastrophic levels of mortality.

Bogus self-employment

Before the Covid 19 epidemic, the United Kingdom has witnessed a uniquely British disease, an epidemic of bogus self-employment. A financial and legal system has created a perverse form of competition squeezing out genuine employment by reducing the labour costs to employers.  It is important to distinguish between the genuinely self-employed, small businesses and professional individuals providing services direct to clients and customers (the subject of a recent post by Sylvia Terpe; https://www.eth.mpg.de/5416443/blog_2020_04_06_01), and the fake self-employed, those who are effectively working for a contractor or company, under their control, paid at their dictated rates of remuneration, and often using their capital equipment (e.g. company branded vehicles or software platforms). Employers of the bogus self-employed pay no National Insurance, along with no sick pay, no training or apprenticeships, no pension contributions. Predominantly in the construction industry, where 60% of manual workers are bogus self-employed, self-employment has grown rapidly with the gig economy. No other European country has anything like the sectoral level of ‘self-employment’ in construction. Since 2013, the overall number of self-employed has grown from 4.3 million to 5 million, jumping from 12% of the labour force to 17% (Labour Force Survey). There are 44,000 Uber drivers in London alone. Deliveries for internet companies, such as Amazon, are another typical example. Fast food and restaurant delivery service bicyclists and moped drivers now speed around all our cities.

Pizza delivery driver.

The key point is that for these ‘self-employed’ providing services as intermediaries for often major global companies, the employers of their services pay no National Insurance, no payroll tax, no holidays or sick pay. There is an immediate saving of 13.8% on the payment for labour services, and a corresponding loss of revenue to the Treasury of around £7 billion per year. This fiscal regime, and the absence of clear employment law, has created the plague of extreme insecurity.

Now, the Covid-19 epidemic has collided with the bogus self-employment epidemic. Suddenly, 5 million workers were thrown into financial crisis, their income falling off a cliff. The fiscal and legal regime created a situation in which the Treasury was losing billions year in year out. Now the Treasury is forced to bail out the bottomless pit of which it was architect, to the tune of £30 billion. More significantly, of course, the self-employed, just as much as anyone else, rely on the National Health Service. They have a citizen’s right to free access to healthcare at the point of delivery. Yet the self-employment tax system, particularly for employers of fake self-employment, contributes inadequately or nothing to it, nor to other public services, education, public infrastructure and so on. For a long time, the epidemic of self-employment has been shrinking the fiscal life-blood for those services upon which we all rely.  The coronavirus epidemic and its economic impact have finally exposed an injustice lying hidden, but growing out of control.

For an earlier and more extended version of this piece, see the Institute of Employment Rights blog at https://www.ier.org.uk/comments/the-coronavirus-infected-self-employment-chickens-have-come-back-to-roost-in-their-millions/

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