Brown heads next door: a decade at the Treasury weighed from the contractor's side

Gordon Brown will become Prime Minister next month. Tony Blair announced on 10 May that he will resign on 27 June, and by the close of nominations this week the Chancellor was the only candidate for the Labour leadership. Ten years and one month after he walked into the Treasury, the longest-serving Chancellor of modern times is leaving it for Number 10.

For most of the country the Brown decade will be judged on growth, on the independence of the Bank of England, on tax credits and on the public spending that followed. For the contracting industry the ledger is narrower and the balance is not in his favour.

The measures

The press release that gave IR35 its name was issued on Budget day in March 1999, in the second year of Brown's chancellorship. It has survived a judicial review, a Court of Appeal hearing, three general elections and eight years of lobbying, and it remains the single measure that defines this sector's relationship with the Treasury. The Chancellor never engaged with it publicly, leaving the defence to his Paymaster General, and the assessment of its yield has been left to Freedom of Information requests.

Section 660A, the settlements legislation under which HMRC has pursued husband-and-wife companies, was not Brown's invention, but the decision to apply it to small businesses was taken under him. The Arctic Systems case, which the House of Lords will hear this summer, is the result.

The managed service company rules that took effect last month are the latest addition. The Treasury argued, with some justice, that it was closing a structure built to defeat IR35. The industry's reply is that IR35 created the structure.

Set against those are the measures the Chancellor would cite in his own defence. The zero rate of corporation tax on the first £10,000 of profits, introduced in 2002, was a genuine gift to small companies, until the Treasury noticed how many people were incorporating to take it and withdrew it in 2006. The small companies' rate, which fell to 19 per cent, will rise to 22 per cent by 2009 under his final Budget, in part to discourage the same behaviour. Businesses that were encouraged to incorporate are now being taxed for having done so.

The market

The economy under Brown has been kind to contractors in the way that matters most: there has been work. Through the dot-com collapse and the offshoring scare of 2003 and 2004, demand recovered each time, and the financial sector's appetite for IT skills has kept London rates at levels the rest of Europe envies. Whether that is the Chancellor's doing or the Bank of England's is an argument for economists.

What the industry wanted from him, and never had, was recognition. The self-employed professional working through a company has been treated for a decade as a tax problem to be managed rather than a part of the economy to be encouraged. The Treasury's own figures show the number of one-person companies growing throughout, which suggests the market disagreed.

Alistair Darling is expected to succeed him at the Treasury. The industry's representatives will ask for a meeting. On past form, the answer will come from the Paymaster General.