David T Breaker: Tax relief for 'homeworkers'

David is a student of Politics, Philosophy and Economics at the University of Essex.

> Policy summary

A £500 tax break to encourage more people to work from home, and to encourage businesses to employ more teleworkers, as a means of boosting the potential labour force, reducing welfare dependency and cutting car usage.

> Policy explanation

According to the Office of National Statistics, 3.1 million people work from home in the UK, a total of 11% of the current workforce. Having more people working from home has many benefits. To start with it reduces congestion and traffic, however its benefit is far wider. People working from home can live anywhere, making it ideal for rural and deprived areas. For many people, working from home could be an alternative to unemployment or incapacity benefit, increasing the UK’s labour force and reducing welfare dependency.  By giving a small tax break to companies employing people in their own homes, and to the employees themselves, the government could encourage and support the growth of this idea.

In 2006 the opportunities for home working are huge. We’ve all heard of call centres moving to India, but virtual call centres exist too, connecting callers automatically to people in disparate locations. Call once and you could talk to Polly in Leeds, call again and speak to Norman in Chingford. As a system it already happens. But of course, it isn’t only for call centres. The internet means anyone, anywhere, can be linked to the World.

Under my idea, every homeworker would receive a £250 income tax rebate, whilst their employer would receive a £250 corporation tax rebate. A homeworker would be anyone working from home, but able to attend a out of home ‘office’ once per week.

> Political risks and opportunities

I don’t see many political risks, although it may be attacked as open to fraud. Opportunities however far outweigh the risk…it’s environmentally friendly, good for deprived areas and areas away from the South East, good for people with children, promotes flexibility, good for people with disabilities, good for retired people, good for employment. And, it’s a way of getting a tax cut!!!

> Questions for ConservativeHome readers

• Who are ‘homeworkers’?
• Can we stop fraud?

> Costs

The base cost of the scheme would be £1½ billion per year, based on the 3.1 million people working from home. Naturally, the more people take up the scheme, the higher the costs. That said, there would be savings in benefits for every new home working employee, plus extra tax revenue from them. It could quite easily pay for itself. Cutting taxes is good for the economy anyway.

Comments

[aristeides]

Adds complexity for very little benefit. Sorry - a definite no.

[Mark Wadsworth]

NO - I am all in favour of boosting economic activity and employment by cutting effective tax rates across the board (which means taking a closer look at benefits system and national insurance rather than income tax in isolation) but I do not believe in tax breaks, however well intentioned. PS I am a chartered tax adviser.

[Account Deleted]

Although generally government tinkering is a bad idea, working from home has three major advantages:

1) It cuts travel costs
2) It cuts congestion
3) Can reduce office space needed by companies

But imposes one cost:

1) It makes the worker have to use part of his/her home for office space

I am not sure however that the government can speed up the process of taking up home working. £250 is not that much for companies, and it is not that much for (most) workers.

So I would have to abstain on this. I like it in theory, but think that it would add complexity, which should always be avoided. Might be one of the few areas where Cameron's 'talk loudly and carry no stick' is a good idea - because it IS in companies interests to do, but they will feel nervous doing it... All those stupid, stupid companies/bosses who use the fact they can see someone clock in and out rather than the value of their work as a way to judge how good an emnployer is!

[Account Deleted]

That last sentence is terrible. It should read

All those stupid bosses, who judge their employees on how much time each one spends in the office, rather than how much value each employee adds to the workplace.

[Account Deleted]

And fortunately my boss is not like that!

[voreas06]

This one policy I believe would be massively popular and indeed could change the face of Britain. The upsides to the employee are increased time i.e no commute(which in turn frees up the road and rail network for which will obviously reduce government expenditure on them carbon dioxide pollution etc), increased money (no travel costs), much less office politics etc, judged on performance rather than appearance of performance, more flexible hours. For the employer it will mean reduced absenteeism (much less likely to do a sickie), increased productivity (less office politics, judged much more on performance), Likely to be reduced costs (company cars, rental, heating, lighting, security costs).
The disadvantages for the employee will largely be about do you actually want to work from home some won't but I think most people would jump at the chance. For the employer it comes down to culture and poor management, bad managers need to micro manage employees and are far more interested in getting their own way than actually benefitting their company. Bad managers will resist homeworking, but the business case for it is incredibly strong and their is absolutely no reason why the public sector shouldn't do it en masse(except of couse poor management).
If homeworking is incentivised there clearly will be changes in business patterns, i.e will city centre blocks be needed and what about all the shops in City centres. Will there need to be much more commercialisation of what are currently dormitory towns.
If the Conservative party does not adopt this policy it would be foolish as it is only a matter of time before Labour and the Lib dems do and the reality is home working is going to happen on a massive scale, it will be very popular, and there is political capital to be earnt in that. One proviso, if home working is encouraged it is only a matter of time before companies hire employees from countries where average wages are far lower(If you can work from home, then so can some guy from india) my answer to that is to disincentivise companies from doing that i.e hit them with a massive tax that will more than offset the reduction in wages.

[aristeides]

1AM

If businesses think it will be more cost effective to have homeworkers, believe me, they will have them. I think one needs to be very careful before talking about "stupid bosses" - people could legitimately ask whether, for example, CCHQ allowed home working, and if not, whether that is because the "bosses" are stupid!

Equally, would you be happy if most of the civil service started home working - "Fine, I'll update your taxcode after I've done the washing-up, sir."? There is an inherently different level of discipline in the office than there is in the home and not everyone is equally suited to both.

David hints in his questions that the main weakness/complexity in his policy, after the one of principle, is one of definition and potential fraud. Who on earth is going to check whether people go into the office once a week, or twice, or more?

[aristeides]

Voreas

If homeworking is so beneficial, the virtue will be its own reward. You seem to be saying that the government would be better at determining the benefits than businessmen at the coalface. History has shown, rather amply, that this is not the case!

"One proviso, if home working is encouraged it is only a matter of time before companies hire employees from countries where average wages are far lower(If you can work from home, then so can some guy from india) my answer to that is to disincentivise companies from doing that i.e hit them with a massive tax that will more than offset the reduction in wages."

The economics of the madhouse, I am afraid to say.

[voreas06]

Not much of an argument Aristedes, It sounds suspiciously like you are an authoritarian middle manager who sees a serious threat to his way of working.

Home-working will increase dramatically as services are more and more offered over the web, and that will indeed mean that service industries in the UK will have to cut costs to compete therefore home-working will become a key competitive advantage. The problem is that if that is the case then British companies will be undercut by less industrialised countries offering cheaper home working labour. So as I see it the British Government (and the EU) would have to secure wages or face an enourmous unemployment benefit bill.
I think all this is and will continue to happen, so the question is can the Conservative party ease the path, I think they can and homeworking will be very popular with most of the workforce, and become a business imperative. therefore it is not a question of whether home working should be incentivised just by how much.

[Richard]

I find myself supporting this proposal for two reasons. Firstly, any sort of tax relief is a good thing in my book. Secondly, my mother works from home.

[aristeides]

Voreas,

To say "Not much of an argument" and then go directly ad hominem is a slightly unorthodox approach to rational debate but I will let it pass.

"Home-working will increase dramatically as services are more and more offered over the web, and that will indeed mean that service industries in the UK will have to cut costs to compete therefore home-working will become a key competitive advantage."

Your statement is homeworking will increase which means that service industries will have to cut costs to compete therefore homeworking will become a key competitive advantage. This is a circular argument and therefore illogical.

"The problem is that if that is the case then British companies will be undercut by less industrialised countries offering cheaper home working labour."

How do you know this? Are there no other factors at play?

"So as I see it the British Government (and the EU) would have to secure wages or face an enourmous unemployment benefit bill."

Perhaps the EU could replicate their enormous success so far in protecting manufacturing jobs from going abroad? Wages policies are all the talk amongst economists these days.

"I think they can and homeworking will be very popular with most of the workforce, and become a business imperative. therefore it is not a question of whether home working should be incentivised just by how much."

Why on earth do you need to incentivise an "imperative"?

Aside from these points, the scheme proposed would be ridiculously expensive to run in proportion to the benefits, liable to fraud, unecessarily complicated, and a waste of time.

[Mark Wadsworth]

Let's look at the practicalities of this.

There are plenty of self-employed who effectively work from home anyway; why give them a tax break for what they are doing already? What about a mobile hairdresser or a painter and decorator who has an office in the corner of his front room. Do they work from home under this definition? And what about people who sometimes take stuff home and do it on the weekend or take a day off to work undisturbed? Do they get a tax break pro rata at £2 per day or something? Surely they've jsut saved a few quid travel costs anyway, so they have already gained by working from home? And so on. Who polices it? How can you possibly prove one way or another what bits of work you did where?

Here's a funny (but true) story - I have a distant friend who told his employer in that he works from home, but then he moved from London to somewhere abroad (no clues!). This all works fine as long as he is on-line, but when he has to go to meet a client he flies to London first and then flies out again, even if it is going back to where he now lives anyway! Question - would he get the tax break as well?

[DavidTBreaker]

The question of who works 'from home' is indeed the most awkward, and would need a good definition if the policy was ever to be adopted. My answer would be someone who does not need to leave home for the purpose of work in any way, so therefore it would be fairly tight.

Companies wouldn't need to worry about homeworkers skivving off to do cleaning or watch TV, as I imagine payment would be by results and computer use monitorred. This could perhaps be used as proof of the person homeworking, thereby elliminating the need for inspectors.

There are already benefits to having homeworkers, however the put-off factor is capital outlay for a virtual call centre system in the case of call centres, and the fact it feels abnormal. A policy like this normalises the concept, and encourages it financially.

I don't believe the state can run or advise business, but it can encourage it. Although £250 isn't much, that is per person, and soon adds up. In a way it's no different to cutting business taxes in poorer areas to boost growth, which I believe Thatcher did a bit, and is the basis for much of the US. Just it's industry specific instead of geographically specific.

Benefits could be huge. There would be less excuse for unemployment, opening the door to proper welfare reform. It would make our services more competitive. And it's a tax cut - which can't be bad? Let's face it, we aren't going to be offered it another way.

[voreas06]

Aristeides

"Your statement is homeworking will increase which means that service industries will have to cut costs to compete therefore homeworking will become a key competitive advantage. This is a circular argument and therefore illogical."

The first companies to allow staff to home work will be able to substantially undercut those that don't due to the reduced cost therefore they have a competitive advantage. The companies that do not then embrace home-working will either have to try and differentiate in some other way i.e they act as a "Luxury" service or they allow home working or they go out of business, I would find it unlikely that those offereing luxury services will be able to compete as surely someone will just undercut them by offering the same service with home workers. So Eventually the Competitive advantage of home working will be wiped out as everyone will have to do it.

"How do you know this? Are there no other factors at play?"

Depends on what it is I suppose, but I see no reason why for a arguments sake Tesco sets up Tesco surveyancing or accounting, hires dirt cheap solicitors or accountants working from home in India to do the work and undercuts your local solicitor/accountant dramatically even if he is home working.

"Perhaps the EU could replicate their enormous success so far in protecting manufacturing jobs from going abroad? Wages policies are all the talk amongst economists these days"

I should have said jobs rather than wages, but the reality as I see it is we are either as a nation going to have to take a reduction in standard of living or we are going to have to interfere in the effects of Globalisation, and the bigger you are the more likely you are to have an effect.

"Why on earth do you need to incentivise an "imperative"?"

You don't necessarily, but it is going to happen anyway, and as the party of business and the environment surely it says the tories are forward looking, prepared and have a vision of how they want the UK to look after the Home working revolution rather than just letting the market do its thing and clear up after.

"Aside from these points, the scheme proposed would be ridiculously expensive to run in proportion to the benefits, liable to fraud, unecessarily complicated, and a waste of time."

Why would it be ridiculously expensive to run, surely it can be just done through PAYE, I think you would need to take into account the costs of transport of not incentivising home working. I fail to see how it is complicated, open to fraud yes but so is any system done through the pay packet e.g. childcare vouchers.

Mark Wadsworth

"There are plenty of self-employed who effectively work from home anyway; why give them a tax break for what they are doing already?"

I wouldn't.

"What about a mobile hairdresser or a painter and decorator who has an office in the corner of his front room. Do they work from home under this definition?"

No I woudn't do it for the self-employed

And what about people who sometimes take stuff home and do it on the weekend or take a day off to work undisturbed? Do they get a tax break pro rata at £2 per day or something? Surely they've jsut saved a few quid travel costs anyway, so they have already gained by working from home?

No they wouldn't I would imagine an amendment to contract that states you agree to work from home, or work from home 2 and a half days a week etc.

"And so on. Who polices it? How can you possibly prove one way or another what bits of work you did where?"

I don't think it is relevent as I said above it should not be ad-hoc.

Here's a funny (but true) story - I have a distant friend who told his employer in that he works from home, but then he moved from London to somewhere abroad (no clues!). This all works fine as long as he is on-line, but when he has to go to meet a client he flies to London first and then flies out again, even if it is going back to where he now lives anyway! Question - would he get the tax break as well?

If he pays tax in the UK then why not?

[Timc]

This is an excellent idea.

One area that should be looked at is the reduced CO2 emissions if millions of extra people did not do an unnecessary commute. In addition there would be reduced costs on highway maintenance and subsidized public travel.

The reality is that the technology to make this happen (widely available broadband) is very recent in this country and an incentive like this would encourage the cultural change in Britain that many American companies have already adopted.

From a business perspective, it would enable us to be able to provide a more competitive workforce.

Finally, it would offer flexibility for many employees who have family commitments.

[DavidTBreaker]

"Here's a funny (but true) story - I have a distant friend who told his employer in that he works from home, but then he moved from London to somewhere abroad (no clues!). This all works fine as long as he is on-line, but when he has to go to meet a client he flies to London first and then flies out again, even if it is going back to where he now lives anyway! Question - would he get the tax break as well?"

Anyone paying tax in the UK would be fully entitled to the tax break. That said, since he is flying to meet clients in London, he is working away from his home, and so would not be eligible for this tax break under my tight definition of a homeworker. You could however have a looser definition to cover anyone with work based from home, thereby encouraging start ups and the self-employed as well, but that wasn't my main policy suggestion.

[E L Marberry]

The correct answer is to ensure that the externalities of commuting are properly priced into the commute. If that is done then the market will decide what is best and what the relative advantages are. At the moment most car commuters are massively subsidised by the rest of us. Road pricing with the revenue generated either passed by as an Employers' NI cut or spent on appropriate environmental restitution is the proper way to do this.

[voreas06]

E L Marberry

"The correct answer is to ensure that the externalities of commuting are properly priced into the commute. If that is done then the market will decide what is best and what the relative advantages are. At the moment most car commuters are massively subsidised by the rest of us. Road pricing with the revenue generated either passed by as an Employers' NI cut or spent on appropriate environmental restitution is the proper way to do this."

I find many things about road pricing deeply unpleasant, especially the spy in your car element which just reeks of this Government's Control Freakery. I actually see incentivising home-working as a far less sinister and costly alternative to tackling congestion than disincentivising road travel through overt surveillance. Also If you offer someone the chance to vote for a party that wants road-pricing or one that wants home-working I think 9 out of 10 voters will choose home-working.

[a-tracy]

Is a Sales Person working from home a homeworker even though all of his appointments are out and about?

No, sorry I don’t agree with your tax break.

Some jobs just can't be done at home, caring, nursing, production line, bar and restaurant work, so you think that those staff should be taxed more than you just because you're able to work from home?

Just an aside - The Health & Safety at Work act 1974 primary legislation; Management of H&S at Work Regulations 1999 states: 'Good practice dictates that lone working should be avoided as far as possible.'

As you say homeworking gives many benefits so why give tax breaks to people who are already saving money by not commuting they already have no fuel, vehicle wear and tear, no parking, or expensive rail fares to fund?

[Mark Wadsworth]

E L Marberry, on the PM's petitions website the anti-road pricing petition is way ahead in first place with 50,000 votes. Just thought I'd mention it.

[Mark Wadsworth]

E L Marberry, on the PM's petitions website the anti-road pricing petition is way ahead in first place with 50,000 votes. Just thought I'd mention it.

[Graeme]

I'm surprised by the negative thrust of the responses. I love WAHing (Working At Home) because the one thing I find truly repellant about modern life is the commute. Reducing it by 20% per week is a key factor in keeping me happy and sane. I think far more people could work at home than are currently doing so -- we're in a period of transition I think (if that doesn't sound too 1970s Tomorrow's World-ish) -- it's just insane for people to travel, with difficulty and at cost, when they can be online and have virtual meetings from home. I work for a transnational R&D organisation and maybe I've just been forced into the realities of tele- and video-conferencing through spending so much of my life doing it -- OK, it's never as good as face to face, but it's a lot better than no contact at all -- and the technology has already leapt ahead from where we were just a few years ago.

So I support this, under the banner of encouraging General Well-Being, to help the crush in the South-East with respect to public transport, as an environmental measure, as a tax-cutting measure -- all great Conservative reasons! Thanks for writing this policy David.

[voreas06]

a-tracy

"Is a Sales Person working from home a homeworker even though all of his appointments are out and about?"

no, he/she is possibly self employed, even if employed not applicable as one of the main reasons is to reduce traffic.

"Some jobs just can't be done at home, caring, nursing, production line, bar and restaurant work, so you think that those staff should be taxed more than you just because you're able to work from home?"

That is very true and I don't see incentivising home-working as an across the board tax break, but neither is childcare vouchers, but I think it will improve productivity and reduce congestion. And On the plus side for these workers they will be able to commute to work much faster due to reduced traffic.

"Just an aside - The Health & Safety at Work act 1974 primary legislation; Management of H&S at Work Regulations 1999 states: 'Good practice dictates that lone working should be avoided as far as possible.'"

That is probably very true if you were working in a mine in 1974 but this is not quite the same.

"As you say homeworking gives many benefits so why give tax breaks to people who are already saving money by not commuting they already have no fuel, vehicle wear and tear, no parking, or expensive rail fares to fund?"

Again that is true but we have both a productivity gap and a congestion problem in this country and it may go some way to solving them, it also might deal a blow to the bad micromanager that insists on overseeing his staff's every activity by highlighting to senior management that there is a better more cost effective way of operating.

[a-tracy]

Working from home can isolate people; some people need to work with others, not everyone is suited to lone working.

After setting up a home office it could be difficult to organize sick or holiday cover for a key worker as not just them but all the company equipment would be unavailable for the period, they also wouldn’t be sharing their skills and training others which happens naturally in an office environment.

I'm not against homeworking voreas06 I am however against tax breaks for this advantageous career option.

The sales people I know are employed but work from their home base as their Manager doesn't need to micro-manage them as their results are clear to see.Working from home can isolate people; some people need to work with others.

Regarding Health and Safety for lone workers I’ll give you an example of where its the same today; If you are presently working from home alone I hope that your Employer has concluded to following:

A Risk Assessment
A Fire Assessment
Portable Electrical Safety checks every year including all equipment that has a lead (cable) including your kettle, heater, lights, computer.
Electrical Safety Check every three years.
Display Screen Equipment regulation checks (e.g has your chair got a five-star base with casters and a seat height adjuster).
Has your workstation been checked – does it comply with legislation,
Have you got a first aid kit,
Have you got a fire extinguisher and is it fixed securely to ensure they are available at all times, and have you been trained how to use it.

[DavidTBreaker]

"Just an aside - The Health & Safety at Work act 1974 primary legislation; Management of H&S at Work Regulations 1999 states: 'Good practice dictates that lone working should be avoided as far as possible.'"

I think this piece of legislation could be due for shredding to be honest. Loads of people work alone, what's wrong with it? Whatever next, a ban on being alone at home in case you need first aid? Driving alone in case you pass out?

"As you say homeworking gives many benefits so why give tax breaks to people who are already saving money by not commuting they already have no fuel, vehicle wear and tear, no parking, or expensive rail fares to fund?"

To reduce congestion, encourage more to work at home, take strain off the South East, to encourage businesses to expand homeworking which for many is their only real alternative to unemployment, to reduce the burden of taxation in a Cameronian acceptable way...

"Working from home can isolate people; some people need to work with others, not everyone is suited to lone working."

It's not compulsary.

"After setting up a home office it could be difficult to organize sick or holiday cover for a key worker as not just them but all the company equipment would be unavailable for the period, they also wouldn’t be sharing their skills and training others which happens naturally in an office environment."

Virtual offices link many 'home offices' together electronically, the others would cover for anyone away.

"Some jobs just can't be done at home, caring, nursing, production line, bar and restaurant work, so you think that those staff should be taxed more than you just because you're able to work from home?"

You could say that about any tax cut. Why should Tax X be cut but not Tax Y?

"The sales people I know are employed but work from their home base as their Manager doesn't need to micro-manage them as their results are clear to see.Working from home can isolate people; some people need to work with others."

They can, it's not compulsary.

"Regarding Health and Safety for lone workers I’ll give you an example of where its the same today; If you are presently working from home alone I hope that your Employer has concluded to following:
A Risk Assessment
A Fire Assessment
Portable Electrical Safety checks every year including all equipment that has a lead (cable) including your kettle, heater, lights, computer.
Electrical Safety Check every three years.
Display Screen Equipment regulation checks (e.g has your chair got a five-star base with casters and a seat height adjuster).
Has your workstation been checked – does it comply with legislation,
Have you got a first aid kit,
Have you got a fire extinguisher and is it fixed securely to ensure they are available at all times, and have you been trained how to use it."

I'd hope homeworkers would have the common sense to ensure their own safety at home, and that regulations would be changed under a Conservative government to expect that. A list like of regulations like this just for homeworking is the Nanny State gone mad.