It seems Mr Osborne’s attack on contractors continues apace… In the last 12 months or so we’ve had VAT Moss, the Dividend Tax and the proposed but defeated 1 month IR35 rule.
One suspects Mr Osborne really doesn’t like contractors and now we’re going to have to watch the budget, once again, very closely…
George Osborne is planning a clampdown on a tax dodge used by media stars and mandarins who have their salaries paid through special companies to save thousands of pounds a year.
The Chancellor is expected to use Wednesday’s Budget to tackle the practice of paying staff ‘off the books’, which costs the Treasury more than £400 million a year.
As many as 100,000 people – including senior civil servants and NHS staff – receive their income through personal-service companies: it is intended to benefit temporary workers, but is widely used as a perk by long-term employees.
A couple of points to make here… First you shouldn’t base legislation around a minority of celebrities and useless, overpaid bureaucrats. It won’t end well…
Second the £400m figure lost to the treasury has clearly been plucked out of thin air. It is based on what contractors are paid today. If contracting were outlawed wages would drop dramatically so there would be far less to tax — also no VAT to collect. My prediction, an even bigger black hole in tax receipts…
But my main point here is that huge swathes of Government IT infrastructure is supported by contractors. The very people George wants rid of. The reason is simple to understand, contractors are far more flexible and they don’t add to the employee head count. If George continues with his war he will shoot himself in the foot eventually and I can imagine a little conversation in a few years time between him and one of his SPADs…
SPAD: Wake up George, wake up!!
Gideon: What… What is it..?
SPAD: Nothing’s working George! None of it’s working!!
Gideon: What do you mean, ‘none of it’s working’?
SPAD: The servers, the applications, the IT infrastructure… It’s all offline, it’s all down!!
Gideon: What!! How?!? Is it the Chinese?!?
SPAD: No, no, not the Chinese… There’s no one left to maintain it… I mean there’s that guy Steve who we promoted from admin to Head of IT, but no one else.
Gideon: How?!? How is there only one man maintaining our whole IT infrastructure?
SPAD: Well sir, and you’re not going to like this, you outlawed contractors.
Gideon: Didn’t you offer them permanent positions?
SPAD: Yes, but as one developer put it, “I’m not working on a Government IT mind fuck for £35k a year!”
Gideon: But that’s a good wage, you said they could earn 50 if they worked hard for 10 years? I mean where have they all gone..?
SPAD: Yes, yes we told them all that, but they just laughed and said they were going to work in Advertising…
Gideon: Advertising?!? Why?
SPAD: Well it turns out you get free coffee, a beer trolley on Fridays and there are floors and floors of young, normal, attractive people who might talk to you…