IR35 - 'a policy from the madhouse'

A former Conservative Treasury Minister described IR35 as 'a policy from the madhouse' as the Treasury oversaw the closure and migration of UK IT companies, while, at the same time, planned the recruitment of non-Europeans to meet the skill shortage in IT.

Conservative MP for Fylde, Michael Jack, accused the Government of a 'fiddle me here and fiddle me there' approach to the economy - as typified by IR35 and 'barmy proposals'.

In the Budget debate in the House of Commons, Mr Jack, who has been a long-time campaigner against IR35 said: "The other oddity in the Budget was work permits. It will be 'open sesame' for any IT expert to come to the United Kingdom.

"The Financial Times tells me that the Chancellor is to undertake a recruitment exercise. As he is scouring the world for those people, what is he doing to the indigenous IT experts? Last year, innovative, one-person businesses were going to be taken to the cleaners because of tax changes as a result of IR35. I wrote to one of the major suppliers of IT personnel to the Department of Social Security and to BAE Systems in my constituency. It told me that it would lose these people, who were going abroad because it was easier for them to ply their trade in a better tax environment than that created by the Government.

"It is odd that the Chancellor is now trying to redress the balance of his own economic policy on IR35 by going on an overseas recruitment exercise. If that is not the politics of the madhouse, I do not know what is."

Last year, Mr Jack shared a platform with a PCG representative at a contractor meeting in Blackpool, where he heard directly from contractors. He told the House of Commons: " I had a meeting in my constituency with 60 people from all over the country who will be affected by IR35. They are the very entrepreneurs whom the Government want to encourage. The Government create a tax system whereby those people can reward themselves by a combination of salary and dividend, and then they decide that they do not like the dividend bit, so they clobber them.

"Those people are risk takers: they cover their own sickness, their own pensions, their own training and their own investment. What greater characteristic of a one-person business could there be? Yet the Government's answer to IR35 is to recruit from overseas. It is, as I say, the politics of the madhouse."

Mr Jack was also critical of the naïve approach from the Chancellor who sought to promote e-commerce in the Budget. Mr Jack said: "One of the Chancellor's advisers must have been Martha Lane Fox, because part of the Budget was seriously dot.com. One of the measures was to provide tax relief for people who want to go online. If the Government had known anything about running business in this country, they would have realised that small businesses do not buy their computers, they lease them. Leasing does not come under the terms of that proposal, so it is just more meaningless gesture politics.

"The most successful company in the world of software, Microsoft, did not get where it is with barmy proposals such as the Government have introduced to stimulate small businesses. Small businesses want less bureaucracy, less red tape, less interference from government and continuing lower interest rates. Good ideas will find their way forward without the Government's interference."