Evidence the recession is changing the political environment

16 Apr

One of the curiosities of the current Early Day Motion, tabled by Lorely Burt MP, in the House of Commons, marking the tenth anniversary of the introduction of IR35, noting its disastrous effects on many freelancers and calling for its abolition, is the reluctance of the Conservative frontbench to sign up to it. Granted there may be an element of Party politics in it so close to an election, the Tories will not want to openly support what is a Liberal Democrat led motion. However this did not stop them signing up last year to the EDM on Family Business Tax which was also led by a Liberal Democrat.

Having analysed MPs’ responses to members who posted them on our forums coupled with our own intelligence, what seems clear is that whilst the instinct of Conservative MPs is definitely against IR35, their frontbench are terrified to be seen, at this stage, openly supporting an abolition of any tax when the Government finances are in such a mess. Of course we argue that HMRC do not receive much income from IR35 and at the moment we are trying to prove this using the Freedom of Information Act. But many Conservative MPs are worried they would be open to Government attack on this and hide behind the official line that they are concerned about IR35 but must think carefully about how they move forward on this issue. What is clear is that policy will not be made through an EDM.

Let’s be under no misapprehension about this economic mess.  There is an excellent pre budget piece in the FT today illustrating the bleakness of the public finances in the next few years.   It says the following:

  • Annual public borrowing set to hit £175 billion over next two years.
  •  This is more than 12% of National Income – the worst deficit since 1945.
  • Public spending is poised to jump to 48% of national income next FY (2009-10).  This level has not been seen since the early 1980s, before Margaret Thatcher succeeded in ‘shrinking the state’.
  • The economy is predicted to shrink 3.7% this year, growing 0.3% next year.
  • Tax receipts are likely to form lowest proportion of revenue as a proportion of GDP since the early 1960s.
  • Even excluding the support given to Britain’s banks the burden of public-sector net debt is likely to increase to 80% of national income.

See the full article here.

It is clear we are now operating in a very different political terrain due to the unprecedented recession we are now in. The good times of the period from 1999 to 2007 are over and will not return for many years. PCG needs to be sensitive to this reality.

However, rest assured we at PCG will continue to lobby hard for the abolition of IR35 and indeed it will be the centrepiece of a manifesto we are putting together for the election campaign. We will be speaking to the Tory frontbench team, including their Shadow Treasury Ministers. It may be the Tories will want to bring in a package of more equable taxation for all small businesses which will deal with IR35, however at this stage we need to continue to have a dialogue with them in a constructive and mannered way.

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