The cost-of-living crisis and the self-employed 

While Liz Truss and Rishi Sunak have covered a number of different issues during the campaign, there is one policy area that dominates the debate: the economy. After years of pandemic uncertainty, the country has entered into another period of economic instability. Inflation has risen to its highest levels in 40 years and real-term wages, excluding bonuses, have plunged by an average of 4.1% on the year in the three months to June. The country is also likely to fall into recession, with the Bank of England and other economists forecasting that the economy could shrink towards the end of the year.

In short, people are poorer, and costs have gone up. And they aren’t set to drop anytime soon. The energy bill for an average household is set to increase by around £1,600 to over £3,600 after October's price cap, and everyday costs such as food are set to rise exponentially over the coming weeks and months.

The political reactions to the cost-of-living crisis

Over the course of the past month, Liz Truss and Rishi Sunak have outlined their plans to tackle the cost-of-living crisis.

The frontrunner for Number 10, Liz Truss wants to cut National Insurance and suspend green levies on energy bills. On the other hand, the former Chancellor Rishi Sunak wants to remove the 5% VAT on household energy bills for 12 months from October. While both plans have been criticized in the press for either prioritising growth over inflation or not being effective enough, Truss and Sunak have emphasised putting more money in the pockets of UK households.

Alternatively, the Labour Party has argued this week that it would freeze the energy price cap at its current level of £1,971 – rather than increasing it to £3,300 in October.

What about the self-employed?

While all of these plans could potentially help people manage the cost-of-living crisis, the Tory leadership contenders and the Labour Party have ignored one of the most innovative parts of the UK economy: the self-employed.

Self-employed workers were among the hardest hit by the pandemic and their incomes and businesses have still not recovered. In fact, a report from the LSE published earlier this month found that more than 40% of self-employed had monthly incomes of less than £1,000 – compared with 27% at this income level pre-COVID-19.

With the cost-of-living crisis worsening, it is clear that changes to inflation could seriously damage those freelancers on the lower end of the pay scale. Furthermore, for those on higher wages, the rise in inflation poses problems for how they can pay their energy bills, their mortgage and other household costs.

In the face of record high petrol and diesel prices that are a significant driver behind increases in the cost of living, IPSE has called on the Chancellor, as well as the Tory leadership candidates to increase mileage allowance from 45p to 90p per mile.

We have also called on them to think about the self-employed when they implement their plans to tackle the cost-of-living crisis. If they don’t, then they will have jeopardized one of the most innovative and dynamic parts of the UK economy and risked its ability to bounce back post-COVID-19.

IPSE will continue to represent our members and the wider self-employed on the cost-of-living crisis, regardless of who wins the Tory leadership election. We will also update members on our campaigning efforts on this issue over the coming weeks and months.