E-minister temporarily rewrites Labour's controversial NI policy

Patricia Hewitt, the Minister for E-commerce, appeared to rewrite Labour's policy on National Insurance recently, saying that "Tony Blair and Gordon Brown have made it quite clear that we've got no plans whatsoever to raise the ceiling on National Insurance."

Ms Hewitt who made the comments during an interview with Channel 4's Powerhouse programme, went on to say "We've pledged not to increase income tax and we've said very clearly, 'No plans to get rid of that ceiling on National Insurance'."

However, both Tony Blair and Gordon Brown have repeatedly refused to rule out that there could be an increase in National Insurance during a second Labour term, preferring to state instead that there are more than 250 different tax rules and that they cannot be expected to commit themselves on each one of them.

Patricia Hewitt also spoke recently in the House of Commons on the subjects of both National Insurance contributions and IR35, making no secret of her opinion of service companies.

On the 8th of March the E-Minister replied to a written question about the need for small businesses to have a stable macro-economic climate. She answered "The hon. Gentleman spoke about IR35, which we have debated extensively in the Chamber and elsewhere. He may not think that there is a tax loophole, but I suggest that he reads at least one of the computing journals which notoriously advised information technology contractors last year to pay themselves a salary of no more than just over £4,000 a year and to draw all the rest of their very substantial fees by way of dividends, thus ensuring that they paid neither income tax nor national insurance contributions.

'The IR35 reforms are about a fair tax system that treats employees and the self-employed fairly. The Inland Revenue is working very closely with industry to ensure that there is proper understanding of the self-employment rules. IR35 will have no effect whatever on those who are indeed self-employed, and it will not prohibit in any way the use of personal service companies, but it will remove a tax loophole that clearly distorts the choice between employment and self-employment and leaves employees on modest salaries paying more national insurance contributions than those who are using personal service companies to avoid fair tax responsibilities.'

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Richard Powell, UKTECH