The knife at our throats

Dear Mr Prescott: congratulations on the way the reforms proposed in Sir John Egan’s Rethinking Construction report are gaining momentum. The very successful Movement for Innovation conference on 19 July demonstrated that the industry is determined to drive them through.

As you are well aware, the catalyst for Sir John’s reforms is partnership, and this is being led in an exemplary way by several key government departments. But there is a major problem looming that threatens to permanently damage the reputation of this government and disrupt the Egan reforms. One government body – the Inland Revenue – cannot comprehend partnering. It is unilaterally imposing a tax regime on the industry: the Construction Industry Scheme, which relies on CIS identity cards.

The trouble is that the Revenue’s administration is in a mess, and through no fault of the industry, only 35% of firms have received their cards. My company has about 500 subcontractors on its ledger, and, on 27 July, only 170 had received their cards and shown them to us in accordance with the new rules. From 1 August, we are legally barred from paying anything to the luckless 330 that remain.

We need someone of your influence and standing in government to call the Revenue to heel before the current confusion degenerates into complete chaos.

Our trade associations have failed to persuade the Revenue to delay the introduction of the scheme. We are told that to do so would require primary legislation.

The concessions that the Revenue reluctantly agreed with the Construction Confederation and the Federation of Master Builders last week have only made the situation worse. They take the form of two options: Option A allows main contractors to pay subcontractors if they have seen a photocopy of the CIS card, rather than the original.

The Revenue’s pig-headedness is pushing the construction industry into a more serious crisis than the last recession

Option B allows companies to ask for a dispensation (not a right) to pay subcontractors under the old 714 system – provided their 714 card has not expired on 1 August.

Option A is a non-runner because many firms have not received a CIS card of any description to photocopy. Subcontractors have understandably warned us that they will have to pull off site if we take this option.

But nor can we use Option B, unless we process all subcontract payments by hand. Our new CIS software will not accept the 714 information necessary to enable us to make use of the new option. And, if we re-install our old 714 software, we will not be able to process CIS information; we will also have to chase 714 vouchers by phone for every payment.

We have already paid to have CIS software installed, and have had to employ a temporary worker to cover queries from subcontractors and to co-ordinate the viewing of CIS cards. We will now need to employ a second temp to cope with the further work of changing back.

The Revenue, through its pig-headedness and ineptitude, is pushing the construction industry into a more serious crisis than the last recession. Please intervene without delay and help us bring some common sense to bear by demanding, on our behalf, the following:

• Instant legislation to allow a moratorium on the introduction of the CIS scheme; it should allow the 714 scheme to continue whether or not 714 cards have expired

• A guarantee that there will be no recriminations against those who have complained. Local Revenue staff are pleading for letters of complaint from telephone callers to help them convince head office to postpone the start of the scheme

• In the unlikely event that the Revenue has a Charter Mark, they should be stripped of it, in the same way as the passport office was, to show that someone in government cares

• Similarly, please insist that the Revenue pay compensation to all those in construction suffering unnecessary expense because of its failure to implement the CIS in a competent manner.

Despite all of your efforts to help construction, the government’s credibility as a partner is being put seriously at risk as a result of the inefficiency and adversarialism of its own revenue department. Its current policy gives the impression that government has a policy of attacking small companies and subcontractors in construction.