I've always reckoned HMRC should allow contractors to work as sole traders. It would benefit everyone (apart from the accountants...)
Trouble is the government probably fears an exodus of 'normal' employed workers to sole traders, with consequent loss of taxes and union rights. The average man/woman in the street would be very tempted by a 10% pay rise (say) in exchange for complete loss of employment rights, especially if they are young and change job frequently anyhow. Also, self employed people aren't natural Labour voters.