Contractor invokes the Laffer curve as post-IR35 spending dries up

Those businesses which invest, take risks and create employment, will not be affected.

This is all the same words that we have seen thousands of times before.

The phrase "create employment" belies once again their lack of understanding of how the new economy works. In the new economy people don't have single "employers" and an index-linked pension to look forward to. Instead they have multiple clients, probably serially and in quick succession. Why? Because skills are scarce and economically it makes no sense at all for one company to hog them.

The government should be encouraging the multiple master model, not trying to reimpose an outdated 19th century system on a market that was operating very effectively indeed.

It is not only ministers that do not understand the new economy. Civil servants by their very nature *cannot* understand it. Why wouldn't you want to work for a huge employer that does everything for you bar tuck you up in bed at night? That is how they think.

My business is part of the economy. Pre-IR35 it was cost effective for my business to put extra hours in to pay for services, than to do them myself. The fees that I generated pre-IR35 funded gardeners, car mechanics, childcare workers, outsourced receptionists, training companies, software firms, computer manufacturers and those wonderful people at the local curry house who housed the business meetings.

Post-IR35 all this spend has stopped. I now grind my own spices and make my own curries. There is little incentive to work those hours any more. A section of the economy has contracted, and taxes have been lost because I have decided to contract my business.

This is all basic economics. It's called the Laffer Curve - increasing tax rates decreases tax revenue.

NeilW

Civil Servant speak NeilW 13/02