The decision by Britain’s top taxman to send his heavy mob in to investigate the courier company Hermes speaks volumes about working life in modern Britain.
Make no mistake, the probe by HMRC compliance officers into allegations that courier drivers are being wrongly classified as self-employed and paid less than the legally binding national minimum wage goes well beyond the business practices of a single company.
Indeed, the news that the Treasury is taking a look at how people are employed across the whole “gig economy” speaks volumes. This is about more than Hermes – it is about the way in which the UK economy has been transformed during the past four decades.
The Britain of the immediate postwar period differed from the Britain of 2016 in a number of ways. The manufacturing sector was bigger, employing more than 8 million people at the peak in in the mid 1960s. Successive waves of de-industrialisation – in the early 80s, 90s and 2000s – have hollowed out Britain’s manufacturing base, which now accounts for about 10% of national output, a smaller proportion than in other leading industrial countries.
The declining share of manufacturing has been accompanied by another trend: the decline in trade union membership, particularly in the private sector. Unions remain strong in those parts of manufacturing that have survived the regular downturns, at companies such as Rolls-Royce and BAe Systems for example, and in the public sector, but they have struggled to get a foothold in the new companies that have been created.
The tendency, therefore, has been for high-paid, unionised jobs to be replaced by insecure, poorly paid ones where employees live in permanent fear of having contracts terminated if they make a fuss. The classic example of the changing face of Britain is the Sports Direct HQ at Shirebrook: a giant warehouse built on the site of a former pit.
These trends have been accelerated by the financial crisis and deep recession of 2007-09, which brought to an end a long period of uninterrupted growth and falling unemployment. The most severe slump in Britain’s postwar history meant workers taking paycuts in order to keep their jobs. Austerity meant redundancy for unionised employees in the public sector.
Self-employment became far more common, but it was not exactly the sort of buccaneering, entrepreneurial self-employment lionised by Margaret Thatcher in the 1980s. Instead, many of those who were working for themselves did so reluctantly after losing full-time employment. As the Resolution Foundation reported earlier this week, the self-employed are earning less than they did 15 years ago once inflation is taken into account.
What’s more, the taxi drivers, motorcycle couriers and distribution centre workers employed in the gig economy have found that they have no entitlement to paid holidays or sick pay even when they are working full-time for a single employer. This arrangement has worked well for the companies because it means a lower pay bill and higher profits. It is not so good for the people described by Theresa May as just about managing.
The drawbacks of this model are now becoming glaringly apparent. With cheap, cowed labour readily available, there has been little incentive for companies to invest in new plant, new technology or training. They have relied on the sweatshop approach instead.
The steady decline of manufacturing has been accompanied by a worsening of Britain’s balance of payments, with the 6% deficit a record for peacetime.
For years, these problems have been bubbling away beneath the surface of the economy without any real attention being paid to them. There has been no wave of strikes in protest at conditions in call centres to mirror those in the coalfields or the car industry in the 1970s and early 1980s.
Instead the unhappiness at what amounts to old-fashioned exploitation has manifested itself in other ways, most obviously through the vote for Brexit on 23 June. This was the chance to protest at low pay and rotten employers and millions of people took that opportunity readily.
So if you want to know why HMRC will be crawling all over Hermes, the reason’s simple: people are mightily unhappy and, somewhat belatedly, the government has got the message.
