Beware Outlawing the IT Contractor Mr Osborne

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…

Gideon: Shit!!

Starbucks giving up

Unlike the plucky fighter pilot of the same name, Starbucks the corporate coffee giant has wilted and turned like Monty Python’s King Arthur.

According to Channel 4:

Given the week ahead, Starbucks may have been trying to pre-empt criticism by issuing a statement saying: “Starbucks has complied with all the tax laws in this country but has regretfully not been as profitable as we would have liked.”

“We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more,” Starbucks said. “As part of this we are looking at our tax approach in the UK.”

© Diego Duarte Cereceda

Starbucks could at least have had the courtesy to duke it out for one Saturday lunchtime against UK Uncut. I would have cheered if, in a statement of uncomfortable truths, Starbucks had announced that due to public misconceptions we have been forced to restructure our tax affairs in order to voluntarily pay additional UK Corporation tax and would therefore, as a direct result, be adding 10p to the price of a coffee in order to protect staff wage increases inline with inflation. Such would be the policy of Gibbo’s Coffee Emporium public relations department, had it existed. As it is, Starbucks’ new approach to public relations helps to conceal the fact that it’s actions were ultimately in everyone’s best interests. They might not have made the case that tax is better spent by them, which would be easily arguable to anyone familiar with Mises, but would at least have exposed the real cost of tax to the UK public and refocused the debate.

What I’ve learned from following this story is that the UK public discourse is narrow-minded and hubristic when it comes to taxation. You often hear people, colleagues, family, charities, talking about what they think should be done with tax money. There is a strangely arrogant tone to it which is married with a kind of modestly that causes them to believe that the people in power could also do an okay job too if it weren’t those pesky Tories/Tax evaders/establishment types/special interests. When you consider economics as a problem of knowledge, skills and decison making though, it’s obvious that the more spending power is decentralised the better will be our economic progress. None of that is reflected in the media discourse on this story. The media would have you believe that tax is an unqualified good, not the unjustifiable error that it is.

I had thought of heading over to Starbucks with members of the meetup to give those arrogant UK Uncut types a stern dressing down well composed leaflet about Austrian economics, and try to get some media traction. If I had gone ahead I would have been busily taping cardboard to placard poles on Sunday evening when I heard about Starbucks’ change of heart. The deafening silence and earnest lack of co-operation I got when I floated it on Facebook saved me a wasted weekend. Just as the UK media are years away from being able to properly discuss these ideas in a balanced way, the UK’s libertarian tendency is not ready to take to the barricades. I wonder if that because my colleagues have realised long before me how far the UK media are away from taking libertarian ideas seriously, or whether we must focus for a few more years on simply running up the flag and building up the strength of the community.

UPDATE: feedback from the pub is that it was a technology failure. I’m pleased, that’s considerably easier to fix.