Malcolm Gooderham is the founder of Elgin Advisory, and a former Conservative Party adviser.
There is a great inequality in the UK – because workers across the public sector enjoy distinctive benefits that compare favourably and markedly with the plight and under-representation of the self-employed. This inequality in job security, income and pension provision is a glaring reality that too often goes unmentioned, and should be a priority and powerful mobilising cause for the Conservative Party.
Labour, Liberal Democrat and Scottish Nationalist politicians are antipathetic, at best, to the interests of business and self-employed workers. The Conservative Party is sympathetic, but often takes a low-key approach to promoting them. After the crushing election defeat of 1997, Conservatives pivoted and turned down the volume on supporting wealth creation as part of an attempt to demonstrate an empathy for the values of the public sector. Of course, the two are not mutually exclusive. Yet, in consequence, the Left has dominated economic debates with a range of consequences. Two standout.
First, the skewing of political and policy priorities towards statist interests and agendas. The Left relentlessly champions more resources over reform for the state – all to be funded by the private sector through higher taxes. Yet they do little to enable the private sector to generate greater income.
They oppose deregulation and tax reductions to the extent of making them sound polemical or antithetical to a stronger society, misrepresenting, but successfully branding, such agendas as a ‘race to the bottom’. Downgrading the political appeal of such policies – and making them less resonant for all politicians – is ultimately counterproductive to the longer-term success of the economy and country.
Second, the Left has successfully pushed a ‘false narrative’ pitting public sector against private sector workers, encouraging the former to feel impoverished, resentful and justified in striking, the negative results of which we are experiencing. In reality, self-employed workers are at a significant disadvantage to their peers in the public sector, who benefit hugely from being employed by the State. If this is a society of ‘haves and have nots’, the winners are arguably in the public sector not their neighbours in the private sector.
Labour and the unions like to promote a misleading image of a private sector in which workers are concentrated in large companies enjoying substantial in-work benefits, salaries and job security. The reverse is the case. Small businesses actually make-up 99 per cent of companies in the UK, with total employment in SMEs at 16.5 million, dwarfing that of large businesses, 10.5 million.
Not only is there a wide range of activities for small businesses and self-employed, but there is a wide range of income being generated which clusters at the lower ends of the pay scales. The self-employed, pre-pandemic, were earning, on average, £200 a week less than those in the public sector. This earnings gap is compounded by the pensions gap.
The total taxpayer funding of the four largest state schemes in 2019-20 was £25.4 billion, almost 30 per cent higher in real terms than in 2009-10. State contributions to individual public sector pensions can often exceed 20 per cent of salary, with guaranteed and defined benefits on retirement.
The self-employed have to make their own provision, while members of company schemes receive a small contribution of three to five per cent. Such is the nature of private pensions that – unlike the public sector – there are no guarantees about size and payouts on retirement. Worse, despite the number of self-employed people growing considerably, too few are even saving in a pension.
The IFS’s Director, Paul Johnson, has remarked that retirement risks “are no longer shared” across the sectors, and workers in the private sector “are left having to manage considerable risks”. Which is one of the reasons that the IFS has launched a Pensions Review, which will consider three questions. Are people saving appropriately for retirement? How should the state support people from late working life into and through retirement? And do people require more assistance to use their wealth appropriately through retirement?
Conservatives need to reflect upon the socio-economic gulf between workers in different sectors and drive the debate and a policy agenda to redress it. Remedies to such issues, readily distorted by the Left, should not rest with it. There also needs to be a reevaluation of what it means to be employed by the state with its unique benefits. For some, the hours may be long and the work demanding; for others in the public sector this will not be the case. The same applies across the private sector – but thos who work in it have much less security.
More broadly, there are various sectors of the economy that are not in receipt of taxpayers’ money that also service the public. This raises the question of how apt it is in this century to label ‘public service’ workers as only those in the employ of the state. It may fit a left-wing prejudice, but it is an affront to many, from farmers to plumbers.
In summary, Conservative politicians are right to challenge the Left on identity politics – and woke policies – but should combine this agenda by tackling left-wing, woke, narratives on economic issues. There is no point securing successes in so-called ‘culture wars’ if the UK economy slides into mid/table obscurity. Without a smart and concerted agenda, future generations of self-employed will lag their peers in the public sector generating significant domestic problems and embedding a disincentive for future entrepreneurs to start a company.
This represents a philosophical divide in British politics which is masked by the Conservatives taking a soft approach to championing the quiet majority. On this matter, as many others, national interest and party interest align and the Conservative party should be proudly championing wealth creators and closing this inequality gap.
Malcolm Gooderham is the founder of Elgin Advisory, and a former Conservative Party adviser.
There is a great inequality in the UK – because workers across the public sector enjoy distinctive benefits that compare favourably and markedly with the plight and under-representation of the self-employed. This inequality in job security, income and pension provision is a glaring reality that too often goes unmentioned, and should be a priority and powerful mobilising cause for the Conservative Party.
Labour, Liberal Democrat and Scottish Nationalist politicians are antipathetic, at best, to the interests of business and self-employed workers. The Conservative Party is sympathetic, but often takes a low-key approach to promoting them. After the crushing election defeat of 1997, Conservatives pivoted and turned down the volume on supporting wealth creation as part of an attempt to demonstrate an empathy for the values of the public sector. Of course, the two are not mutually exclusive. Yet, in consequence, the Left has dominated economic debates with a range of consequences. Two standout.
First, the skewing of political and policy priorities towards statist interests and agendas. The Left relentlessly champions more resources over reform for the state – all to be funded by the private sector through higher taxes. Yet they do little to enable the private sector to generate greater income.
They oppose deregulation and tax reductions to the extent of making them sound polemical or antithetical to a stronger society, misrepresenting, but successfully branding, such agendas as a ‘race to the bottom’. Downgrading the political appeal of such policies – and making them less resonant for all politicians – is ultimately counterproductive to the longer-term success of the economy and country.
Second, the Left has successfully pushed a ‘false narrative’ pitting public sector against private sector workers, encouraging the former to feel impoverished, resentful and justified in striking, the negative results of which we are experiencing. In reality, self-employed workers are at a significant disadvantage to their peers in the public sector, who benefit hugely from being employed by the State. If this is a society of ‘haves and have nots’, the winners are arguably in the public sector not their neighbours in the private sector.
Labour and the unions like to promote a misleading image of a private sector in which workers are concentrated in large companies enjoying substantial in-work benefits, salaries and job security. The reverse is the case. Small businesses actually make-up 99 per cent of companies in the UK, with total employment in SMEs at 16.5 million, dwarfing that of large businesses, 10.5 million.
Not only is there a wide range of activities for small businesses and self-employed, but there is a wide range of income being generated which clusters at the lower ends of the pay scales. The self-employed, pre-pandemic, were earning, on average, £200 a week less than those in the public sector. This earnings gap is compounded by the pensions gap.
The total taxpayer funding of the four largest state schemes in 2019-20 was £25.4 billion, almost 30 per cent higher in real terms than in 2009-10. State contributions to individual public sector pensions can often exceed 20 per cent of salary, with guaranteed and defined benefits on retirement.
The self-employed have to make their own provision, while members of company schemes receive a small contribution of three to five per cent. Such is the nature of private pensions that – unlike the public sector – there are no guarantees about size and payouts on retirement. Worse, despite the number of self-employed people growing considerably, too few are even saving in a pension.
The IFS’s Director, Paul Johnson, has remarked that retirement risks “are no longer shared” across the sectors, and workers in the private sector “are left having to manage considerable risks”. Which is one of the reasons that the IFS has launched a Pensions Review, which will consider three questions. Are people saving appropriately for retirement? How should the state support people from late working life into and through retirement? And do people require more assistance to use their wealth appropriately through retirement?
Conservatives need to reflect upon the socio-economic gulf between workers in different sectors and drive the debate and a policy agenda to redress it. Remedies to such issues, readily distorted by the Left, should not rest with it. There also needs to be a reevaluation of what it means to be employed by the state with its unique benefits. For some, the hours may be long and the work demanding; for others in the public sector this will not be the case. The same applies across the private sector – but thos who work in it have much less security.
More broadly, there are various sectors of the economy that are not in receipt of taxpayers’ money that also service the public. This raises the question of how apt it is in this century to label ‘public service’ workers as only those in the employ of the state. It may fit a left-wing prejudice, but it is an affront to many, from farmers to plumbers.
In summary, Conservative politicians are right to challenge the Left on identity politics – and woke policies – but should combine this agenda by tackling left-wing, woke, narratives on economic issues. There is no point securing successes in so-called ‘culture wars’ if the UK economy slides into mid/table obscurity. Without a smart and concerted agenda, future generations of self-employed will lag their peers in the public sector generating significant domestic problems and embedding a disincentive for future entrepreneurs to start a company.
This represents a philosophical divide in British politics which is masked by the Conservatives taking a soft approach to championing the quiet majority. On this matter, as many others, national interest and party interest align and the Conservative party should be proudly championing wealth creators and closing this inequality gap.