Labour says repeal of IR35 would cost £1 billion per year

Labour has accused the Conservatives' election manifesto of including 'grossly irresponsible' tax and spending pledges which would 'jeopardise the country's economic stability'. The party's pledge to repeal IR35 would in reality, according to Labour, cost £700 million more than the figure announced by the Tories.

Labour are claiming the sweeping series of tax-cuts pledged by William Hague's team would cost the economy a total of £16.69 billion as opposed to the £8 billion estimated by the Conservatives.

Ambitious tax reforms such as Michael Portillo's plan to offer young people the option to change their National Insurance Contributions into private funds - the consequence of which, according to Labour, would be an £8 billion short-fall in the state pension system - have come under intense scrutiny after he admitted they would have to borrow to repair the losses the cuts would incur to the economy.

Similarly, the party's pledge to cut the price of petrol by 6p a litre, compared to Labour's promise to reduce its price by 3p, has come under fire from Gordon Brown who has said the real cost of such a cut would be £2.7 billion and not the £2.2 billion as was originally announced by the Tories. The Chancellor said the differences in figures "deepen the hole right across their manifesto."

Of more importance to the knowledge-based industry however, is the prospect that the party's pledge to axe the stealth-tax IR35 could also suffer from a similar case of underestimation. According to Labour, a complete repeal of IR35 would cost the country £1 billion a year and not the £300 million forecast by the Tories.

Touching on his party's pledge to remove the legislation, William Hague stated in his introduction to the Conservative's manifesto: 'We will free entrepreneurs to build businesses and to create prosperity.'

The 48-page manifesto itself, entitled 'It's Time for Common Sense' is the Tory leader's vision for getting Government regulation and taxation 'off the backs of ordinary working families.' Labour predictably began its attack on the publication before it was even released.

Commenting on the issue of IR35, a Conservative Party Spokesman told UKTECH: 'Labour's failure to deliver on its pledge to back entrepreneurs created much ill will amongst IT industry. Our fully costed proposal will free people who are essential to the new economy from this repressive measure.'