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Labour plan to make construction workers pay for spare bedrooms...

Ian Anfield | 21st April 2015

Last Wednesday, the Shadow Secretary for Work and Pensions, Rachel Reeves, announced that her first job if Labour wins the election will be to scrap the ‘bedroom tax’, the scheme that makes social housing tenants contribute if they continue to live in underoccupied accommodation.

When challenged how she would replace the billion pounds saved so far by reducing housing benefits, Ms Reeves argued the figure was nearer £400m – and that she would make up the lost income by ‘cracking down on bogus self-employment’ and bringing forward ‘deeming’ for self-employed construction workers.

‘Deeming’ is a Labour concept that has been around for some time. It means that self-employed builders would be taxed as employees unless they also provide all the materials that they use, major items of plant, or supply additional labour.

In fact, the plan to do this was dropped by the last Labour government in 2009, after the construction industry rejected it, and the wider worlds of business and accountancy pointed out that the whole idea was deeply flawed and would seriously damage the labour market and economy.

 Hard to believe a policy as destructive as this would ever get through parliament?

However, in the current political world, fiscal sense is less important than political grandstanding. The ‘bedroom tax’ sounds unjust, whereas self-employed people are labelled as tax dodgers, so why not implement a policy that simultaneously ‘rights two wrongs’? Isn’t that a sure-fire winner?

Last April, the Onshore Employment Intermediaries legislation introduced the ‘control test’ to self-employment, with the aim of generating £500m a year from 250,000 agency workers, 200,000 of whom were ‘self-employed’ in construction.

When you consider the new rules were rushed through to pay for free school meals, then targeting a further 500,000 labour-only subbies and imposing ‘deeming’ to pay for spare bedrooms is neither as illogical nor as unbelievable as you might think.

Do you trust the Labour Party? Most construction firms say ‘No’

One thousand construction firms, architects and suppliers were recently asked who they trust most on construction policy, 540 said Conservative, and only 300 said Labour. Now, with deeming back on the agenda, I imagine the gap between confidence in the two major parties will be even bigger.

Whoever takes power in May will be heavily reliant on construction to fund their spending promises, at the same time as delivering on housing and infrastructure pledges.

A few manifesto highlights are:

  • 200,000 new homes every year
  • £15bn on new roads by the end of the decade
  • £2bn/year road maintenance and improvements
  • £50bn on HS2
  • £65bn on the Northern Powerhouse rail schemes
  • £16bn on Crossrail 2
  • £24.5bn on Hinckley Point.

If ‘deeming’ goes ahead, it will impose bigger tax bills on skilled construction workers, and add at least 13.8% to the engagement costs for construction firms.

Which begs the question: Will self-employed workers and the firms that rely on their services be sufficiently in demand to push the additional costs back up the supply chain?

The silver lining for Hudson Contract clients

Whichever way it goes, the one crumb of comfort I can offer is that Hudson Contract clients will continue to benefit from the most cost-efficient methods of engagement, safe in the knowledge that their tax compliance and employment responsibilities are dealt with and indemnified by us.

Meanwhile, it’s going to be a fascinating election on May 7th.