The PM’s definition of who is and isn’t going to be tax raided on Wednesday appears to kick the freelance tech sector while it’s already ‘significantly down.’
A contract IT sector panicked by Sir Keir Starmer’s 11th hour definition of ‘working people’ is issuing fraught appeals about Autumn Budget.
The prime minister said on Friday that a working person “goes out and earns their living, usually paid in a sort of monthly cheque”.
‘Working people have only a small amount of savings’
Labour’s leader said owning shares or rental property doesn’t make you a “working person” — someone who can’t just “write a cheque to get out of difficulties.”
Following an outcry in response to Sir Keir’s definition, made under pressure in a Sky News interview, No 10 reportedly clarified that working people can still have a “small amount of savings.”
The PM’s definition of “working people” is significant, because he has repeatedly said his government won’t increase taxes on working people in Wednesday’s Budget.
‘Starmer’s working people definition alienates self-employed’
“This [definition of working people by Sir Keir] will alienate the [UK’s] 4.3 million self-employed working people,” says tax lawyer Rebecca Seeley Harris of ReLegal Consulting.
“[It will also alienate] landlords and those [individuals running] owner-managed businesses.”
Seeley Harris says Starmer’s definition of working people is “astonishingly uninformed,” although she is not surprised.
‘Lack of understanding’
Speaking after the government published four employment status consultations, but left out both Single Worker Status and whether umbrella companies will be included under the Fair Work Agency, the tax lawyer said:
“[The PM’s ‘working people’ definition] is another example of the lack of understanding [from this government about] this sector.”
Another expert on IR35, Chris James, said the focus since Friday on what a “working person” is, online and in the press, has been “staggering.”
“But the new government have only got themselves to blame, because they’re relying on the definition to justify tax changes in what looks like being a seismic Budget”.
‘Tied up in knots’
The chief financial officer at Inflow Finance, James also said Starmer’s comments prove “you really can tie yourself up in knots, just with a sentence or two [from] a manifesto.”
Published on June 13th 2024, Labour’s general election 2024 manifesto — Change — states:
“We will ensure taxes on working people are kept as low as possible.
“Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rate of Income Tax, or VAT.”
‘Autumn Budget 2024 must address contractor IR35 concerns’
The phrase “working people” is mentioned by Labour some 20 times in the 130-page manifesto document.
Starmer returned to the phrase in August, mentioning it twice in his ‘Fixing the Foundations’ speech – where he also spoke about mortgages.
On Friday, contractor home loan advisory Broadbench shared its hopes for this week’s Autumn Budget.
“I would like to see chancellor Rachel Reeves address contractor concerns about IR35, and start a consultation,” Joanne Mitchell, a manager at Broadbench began to ITContracting.com.
“Support for training and upskilling would be great, though I’m not hopeful.
“And Labour should stick to their promise of keeping the basic corporation tax rate at 19%, as any increase would worsen the talent drain of contractors seeking work overseas.
“It’s important that Autumn Statement offers more support for small businesses and startups, especially for contractors operating as limited companies.”
‘Worst IT contractor jobs market in 25 years’
A limited company contractor, Paul Mclure, told ITContracting.com on Friday that the IT contractor jobs market is “the worst I can remember it in over 25 years.”
“Very few live roles, on poor rates, and primarily inside IR35,” said Mclure, a previously public sector IT consultant but with top commercial clients under his belt too, like HSBC.
“I’ve been out of contract since January.
“It appears that business confidence this year, fuelled by an early election, Labour’s subsequent performance, and reckless statements regarding the forthcoming budget, has tanked to the extent that [organisations] are putting off hiring permanent staff.
“[Tech] projects are being delayed, so few IT contractors are being engaged. I’m even seeing recruiters being let go, as there is not enough revenue to keep them on.”
“This may improve after Autumn Budget. But I’m not betting on it.”
‘Significantly down’
The Recruitment & Employment Confederation confirms that on a national basis, demand for IT skills on a temporary basis is severely flagging.
“What I can say is that, overall, [in both the public and private sectors] IT contracting demand last month was significantly down on the same time the year before,” Kate Shoesmith, REC’s deputy CEO told ITContracting.com.
“[However] demand was lower for all sectors last month [not just technology] – except for blue collar workers…[and] I think that probably speaks to Christmas hiring.”
‘Tech jobs market in the worst state ever’
A former Microsoft, Google, Paypal and Skype technologist, Nadine Drelaud, is drawing on the wisdom of crowds to work out the cause of the jobs market malaise.
Posting a poll to LinkedIn, Drelaud asked: “What do YOU think are the main reasons for the current tech market being in the worst state it’s ever been in?”
Forty-one per cent of the 441 poll respondents blamed the “global economic downturn,” which may give Reeves some justification in the likely event she unveils tax increases on Wednesday.
‘IR35 changes’
But 27 per cent of Drelaud’s mainly tech and AI industry ‘followers’ blamed “Brexit and poor government policies.”
A further 22% blamed IR35, specifically the “IR35 changes” introduced in the public sector on April 6th 2017, and in the private sector on April 6th 2021.
An expert in contract recruitment, Kate Cross, is signalling that the UK market is now being recognised from afar — but not for the right reasons.
‘Oversaturated’
“When out in Dubai last week I met with a UK founder it’s his view that the UK recruitment sector is in ruin”, the founder of Harvey Jacob Recruitment wrote on Friday.
Cross continued: “And it seems to be a common opinion [that the UK jobs market is] oversaturated; [and suffering from] a lack of talent [as well as] poor practice.”
Fresh from calling the chancellor to “protect flexible and agency working” on Wednesday, in light of an Employment Rights Bill officially estimated to cost employers £5billion a year to implement, the REC pointed to a few of the IT labour market’s bright spots.
‘Higher demand amid short supply’
The confederation’s Ms Shoesmith told ITContracting.com: “There were a number of specific skillsets in the IT-tech contracting market [last month] where there was higher demand and short supply.
“Among other roles, they particularly mentioned shortages in Cyber Security, Data Engineers, Front-End Developer, Full-Stack Developer and Software Architects.”
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