Off-Payroll Working (Economic Affairs Committee Report)

Lord Desai Excerpts

Wednesday 27th April 2022 Grand Committee

[Lord Desai (Non-Afl)]

My Lords, I served on this committee. I was specially drafted to serve on it and it was a great experience, because I found it very difficult to understand the problem. I was aware that various people had suddenly declared themselves to be self-employed which I knew to be completely fraudulent, especially when Ken Livingstone, my socialist friend, decided that he could avoid tax by becoming self-employed. I always regarded this particular thing as a problem of fairness. It is quite clear that if you give people half a chance they will invent themselves all sorts of ways of avoiding paying tax. As far as I am concerned, that is a tax avoidance problem.

Obviously, there are different kinds of income. Some are more uncertain than others. It seems to me that the principle is that you treat more uncertain incomes differently from incomes that are more or less certain. All my life I was a lecturer—or a professor, at LSE. My income was known, I had to pay my PAYE and that was that. However, there are people who are actors, musicians or playwrights or whatever and whose income is uncertain, so to some extent I think what we need here is a preliminary anthropological study by the tax authorities into how different people make their money in different ways. You have to have genuine uncertainty of employment to be able to qualify as self-employed. That seems to me to be absolutely standard.

Actually, while I was doing this work, the Equity trade union contacted me and asked if I could give my learned opinion on this matter. I said that I had absolutely no idea how to tackle this problem, because it is not the size of income but its uncertainty that determines the fairness—or unfairness—of the tax system.

I still consider that we should find a way of distinguishing between different incomes, not so much by size but by variability over a period. We should distinguish people who are not sure of employment, such as actors or musicians, who may make a lot of money while they are employed but whose employment is not guaranteed from month to month, from people who have absolutely no reason to think of themselves as self-employed because they are just contracting themselves differently with an employer and have a perfectly well-known and certain contract between them and their employer. So, to the extent that this is a tax avoidance scheme which helps both the employer and employee, it is a very damaging phenomenon, because it makes people doubt the fairness of the tax system.

All I can say about this matter is that I still find it very hard to get to grips with this problem. As and when HMRC, or whoever else, wants to do a different study, they ought to do an empirical study of different kinds of employment and incomes and genuinely establish the variability of employment prospects and income. They are the two aspects in which employed people differ from the self-employed. If we can establish that distinction in some legal way that is guaranteed not to be evaded, I think we can set up this concession that some people can be treated differently for tax purposes.

There are problems with employment rights and all that that involves as well, but I presume that it is the variability of employment and income likely to be earned when you are employed that are the main things. That cannot be dealt with without a proper anthropological survey of what kinds of employment people have. To that extent, as and when anybody wants to do research again, please let them do it properly. I know that there is the Taylor review, but we need something more than that. We need proper anthropological research into what kinds of employment and incomes there are in this economy.