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Industry hopes self-employment crackdown will be put on ice

Critics of the Government’s plan to crack down on “bogus self-employment” are hoping a pledge to tackle the issue when the industry recovers will see it delayed.

Measures to tackle self-employment status are top of the construction industry’s list of issues to worry about when Chancellor Alistair Darling delivers his Pre-Budget Report next week.

The Government has proposed a new set of rules to judge the self-employment of workers. These would see only those supplying plant and equipment to carry out their contract, sourcing and supplying materials or hiring other workers regarded as legitimately self-employed.

The Government has said the moves, which might affect up to 300,000 workers in the sector, will not be introduced until there is an upturn.

A consultation document read: “In particular, the Government recognises the effect that the economic downturn has had on the construction industry, and intends that the measures developed as a result of this consultation will take effect when the industry is in a stronger position.”

But senior manager in employment tax consulting at Ernst & Young Alistair Gibson said there might be ways for the Treasury to go ahead anyway.

“It depends what their measurement is. The Government might hide behind something like share prices, which have improved a little bit,” he said.

“I think it’s 50-50,” added Alastair Kendrick, a director at accountants Mazars.

But he believes the Government could face opposition from backbenchers, after a letter-writing campaign by some of the major trade associations opposed to the plans.

The self-employment issue is likely to be the key concern for the industry ahead of the PBR. Mr Kendrick said a potential VAT hike might also worry some, with suggestions of a 20 per cent rate on the cards.

While construction companies can recover VAT paid, a higher rate would present a serious cash flow issue.

One area where few expect any notable activity is on stimulus plans, with Government finances in too poor a position to justify any fiscal boosts.

Industry bodies have sent their annual wishlists to the chancellor ahead of the report’s release.

The Home Builders Federation urged Mr Darling to extend HomeBuy Direct to September 2010. The scheme, which allows people on modest incomes to borrow a 30 per cent deposit to buy a home without paying back interest for five years, is due to run out in March.

Meanwhile, the Construction Products Association wrote to the chancellor asking for him to put further pressure on banks to lend to the industry, and to extend the credit insurance top-up scheme until summer 2010.

The CPA also called for a commitment not to let public spending fall below 2.25 per cent of GDP, for no further tax increases on businesses, and for a review of products and services eligible for lower VAT rates on environmental grounds.

CPA chief executive Michael Ankers said that despite measures contained in last year’s PBR to boost the economy, the UK construction industry had seen proportionately less fiscal stimulus than those in other countries.

He added: “The industry is relatively labour intensive, and a very high proportion of the products and materials are manufactured or supplied from companies in the UK. This is one of the main reasons why many other countries have committed so much more of their fiscal stimulus packages to investment in construction.”

Mr Ankers joined the HBF in calling for the Government to add more green items to its list of those qualifying for a lower rate of VAT.

UK Contractors Group director Stephen Ratcliffe said: “Our main plea for the PBR is for continued infrastructure spending.

“We have had discussions with the Government and opposition parties, and we are finding that they have a clear commitment to continued capital spending. Now that needs to come through.”