Government response to the Taylor Review: damp squib or small step in the right direction?

Blog posts

7 Feb 2018

Nigel Meager

Nigel Meager, Institute Director

The government has published its response to the Taylor Review of Modern Working Practices, which Theresa May commissioned to much fanfare and some surprise a couple of years ago.

Matthew Taylor himself has welcomed the government proposals as ‘substantive and comprehensive’. Others including trade unions have been less positive, seeing it as an opportunity missed, with the TUC characterising the response as a ‘baby step’ rather than a ‘giant leap’.

Some commentators who welcome the direction of change embodied in the response have also criticised it for being more ‘words rather than deeds’ with few concrete changes and many of Taylor’s suggestions being referred onward for yet more consultations and research.

We at IES concur with the general approval of the concrete steps announced in the response, particularly the role of HMRC in enforcing holiday and sick pay for vulnerable workers, and the entitlement to a clear statement of employment rights from day one of employment. While most will regard such proposals as ‘no-brainers’, they are a million miles from the proposals on employment regulation commissioned by the Coalition Government in 2012, focused on reducing regulation and freeing employers from ‘red tape’.

Another new right in the latest response, the right to request a more secure contract, is perhaps less impressive. The evidence on existing ‘rights to request’ (for flexible working, or for time off for training) is at best mixed, and it remains unclear that simply having the right to ask for something at work increases the likelihood of getting it. Indeed IES’ own research on the right to request time off for training suggests that lack of awareness of the right is a major barrier to it being used. How likely is it that the most vulnerable workers will become aware of their new right to request a more secure contract, or be confident that exercising the right won’t impair their relationship with the employer?

What about self-employment and the gig economy (not the same thing, by the way, as the vast majority of the self-employed are not workers in the gig economy)? It is arguable that committing to further research and consultation, as the government has done, is equally consistent with the principle of evidence-based policymaking as it is with the theory that it is simply kicking the difficult questions into the long grass. All the research on both the gig economy (including the latest IES research on this, published alongside the government’s response to Taylor) and on self-employment more generally, stress the massive diversity of these groups; accurately identifying where regulation and intervention should best apply is not simple or straightforward. Many self-employed and gig economy workers are happy with their working lives, many welcome the autonomy, flexibility and independence of these kinds of work, and many have a decent degree of financial security. Of course, many do not and the difficulty for policymaking is accurately unpacking the aggregate concepts of ‘self-employed’ or ‘gig economy’ to identify which groups are which and which should be regulated, protected or indeed reclassified as employees with all the rights and obligations of dependent employment. It is to be hoped that the new consultation on employment status announced in the response to Taylor provides further evidence on where some of these boundaries lie, and that evidence is sufficient basis for policy/legislation.

Sticking with evidence, there are some real disappointments on the self-employment/gig economy front. If ‘modern employment’ involves more people spending more of their lives in self-employment or the gig economy, there are major questions to be asked about the implications for their careers over their lifetimes and particularly for their access to:

  • skills development – research shows that the self-employed are much less likely to acquire work-related training than comparable employees;

  • pensions – self-employed workers are much less likely to save for a pension or build up savings than comparable employees; and

  • support through periods of ill-health or family formation – via sickness and maternity/paternity pay and rights.

These issues are largely missing from both Taylor and the government response, but the evidence suggests that they are important.

Lastly, while Taylor’s formal remit did not include tax matters, he ignored this and made a strong recommendation for equalisation of the tax/National Insurance status of the self-employed with that of employees, to reduce the artificial incentive for self-employment posed by current arrangements (the case has long been made by independent commentators such as the IFS). It is, however, no surprise, given the furore that attached to the (withdrawn) proposals in the 2017 Budget, that Taylor’s recommendation has again been firmly rejected in the government response.

The Government response is a small step in the right direction, because it includes important measures to improve employment rights for the most vulnerable, with consultation and further evidence collection proposed before additional action on other measures.

Disappointingly and despite the evidence, it has failed to grasp the tax equality issue, but this is likely to return to the future political agenda, not least because the trend towards equalisation of rights and benefits between different categories of workers makes the differentiation in tax treatment even harder to justify.

Finally, like the Taylor report itself, it completely misses some areas (pensions, training, maternity rights for example) where there is clear evidence of vulnerability among the growing populations of self-employed and gig economy workers.

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Any views expressed are those of the author and not necessarily those of the Institute as a whole.