This is one tax change we should welcome

Last week’s decision to push ahead with the government’s proposed crackdown on what it calls “bogus self-employment” in construction, analysed this week, will undoubtedly cause much consternation in the industry.
But should we fight it?

Certainly the move from the current system — which allows the employers of around 200,000 site labourers and tradesmen to effectively sidestep the National Insurance contributions they would normally make for employees — will surely add cost to projects. Not least because, as consultant Core Five estimates, around 35%-40% of a construction project’s cost go on site labour.

Therefore, contracts that have been signed before this decision was made could be put under serious pressure if the agreed price had factored in the use of relatively cheap self-employed labour.

This is worrying at a time when in many areas clients still have the whip hand over prices, meaning the temptation will be for contractors to squeeze subbies, and subbies to squeeze pay rates for labour.

Already this squeeze is being felt by the intermediary agencies who currently administer this system and are now being asked to adapt by 6 April. Some are already opting to shut their doors.

And it seems unlikely HM Revenue & Customs (HMRC) has the best interests of the nation’s labourers in its sights in introducing this policy: its consultation makes it clear it will take upwards of £500m a year in additional revenue from the change, an estimated £2.2bn over the next five years. Which is quite a motivation to clampdown when public finances are still so tight.

The construction industry’s long-standing use of temporary labour marks it out as an almost uniquely old-fashioned employer (to put it politely)

So: a disruptive policy that will add costs to an industry, brought in by a government desperate to shore up its revenue base. It seems obvious the we should oppose it, right?

But actually it isn’t. The construction industry’s long-standing use of temporary labour in a way that removes the employment rights most of the rest of us enjoy — holiday, sick pay, pensions, notice periods — marks it out as an almost uniquely old-fashioned employer (to put it politely). HMRC estimates just 50,000 workers outside of construction use this system.

Yes, of course, many of those working in this way are choosing to do so — they are sacrificing what they may see as intangible employment rights in return for something they can easily understand: a higher pay packet. But many others will have no choice — they will be working simply in whatever way they have to to get employment.

We have an industry, now recovering from recession, that is desperate for talent. And that means attracting a much wider pool of people. Men and women, those from ethnic minorities, and those with both professional and practical skills.

There is much hand-wringing by the industry’s leaders about how to make it a more attractive sector for employees, often focusing on the role of schools and career advice.

But the industry needs to take a hard look at itself and ask whether, in 2014, it isn’t exactly the continuation of employment practices that are more 1914 than 2014 which prevent the industry losing its poor reputation among young people. Because despite all the evidence of profound satisfaction to be gained from a career in construction, it is still perceived by some as low-skill and, frankly, slightly “dodgy” industry to work for.

So, yes the government’s changes on self-employment will be painful. But they are probably a necessary part of a wider process needed to change the industry’s image, and make it fit for the future. 

Joey Gardiner, Building deputy editor