Budget: No joy for contractors

The Chancellor does his bit for e-commerce with tax breaks on buying computers - but as Hague points out, the high-technology specialists are leaving the country or being forced to close down businesses.

One word kept recurring in the Chancellor's Budget - that word was enterprise.

Amid the headline-grabbing points of unlocking the war-chest and increasing public spending, the Chancellor kept returning to 'enterprise'. This was the 'enterprise' Budget. He planned to move the country into the e-world with promises of tax breaks and training courses for small business wanting to invest in computers.

The Chancellor must have thought he'd done his bit for the IT and e-commerce world.

However, as one contractor pointed out: "The fact that the Chancellor thinks that he can solve the e-commerce issue by putting computers in offices shows how little he understands about this. It's pointless having hardware if the people who develop the cutting-edge software programmes are leaving the country in droves or closing down their businesses."

The point was not missed by Leader of the Opposition, William Hague, who described Mr Brown's performance as a mugger who grabs your money and then wants you to thank him for giving you your bus-fare home.

Mr Hague demonstrated this in detail by using the example of IR35 - the 'stealth tax on the self-employed contractors'.

He said: "This is a £475 million tax on our future, driving many high-technology businesses abroad". He quoted extensively from a letter from a contractor who was in the process of closing his business because of IR35. Hague predicted that it would lead to the first brain drain since Lord Healey's time.

In the follow-up Budget material, Shadow Secretary of State for DTI, Angela Browning, reinforced the point by quoting former PCG chairman Andy White.

Her statement referring to the Capital Allowances for ICT equipment said: Labour claim to want to help small business take advantage of the internet revolution but at the same time is introducing a stealth tax, IR35, on entrepreneurs working in key industries of the new economy. This is already causing a brain drain. Andy White of the Professional Contractors' Group - which represents thousands of IT experts - has said that Labour's tax plans will "kill the enterprise culture" in this key sector."