WELL, that was a short-lived pleasure. However catastrophic Liz Truss’s premiership was, Kwasi Kwarteng’s IR35 tax reform* offered a glimmer of light to millions of small-scale entrepreneurs. Its instant snuffing out by Jeremy Hunt tells us far more about the moral corruption of the globalist Tory Left than all the sound and fury surrounding the reduction in the top rate of tax.
IR35 was brought in under New Labour by Gordon Brown to clamp down on tax evasion amongst the self-employed. Essentially the issue was one of ‘concealed employment’, where some individuals were evading tax by working for long periods for a single employer via personal service companies. In true Brownian style the changes were clumsy and unnecessarily complicated, making it almost impossible to know whether or not you were in violation of the rules.
However, this didn’t really matter because with millions of independent contractors to choose from, the chances of an investigation by the Revenue were slim. All that changed when the onus of proving compliance moved to the end client under chancellors Philip Hammond in 2017 and Rishi Sunak in 2021 for the public and private sector respectively. The results were instant and catastrophic: terrified of being found in violation and accused of tax evasion, banks and major corporations issued blanket bans on independent contractors, forcing huge numbers out of business. The most immediate visible impact was in the road haulage industry, where large numbers of independent hauliers retired, contributing significantly to the post-pandemic supply chain problems.
However, it is arguably in the IT sector where the biggest impact was – and will be – concentrated. As highly skilled independent contractors were forced into full-time employment, they were hoovered up by large blue-chip business service companies. These corporations, having made fortunes selling snake oil under the guise of ‘management consultancy’, had long eyed the burgeoning IT sector greedily but lacked expertise. Their business model has always relied to some extent on brand strength and size rather than actual quality of work, with cowardly senior executives being prepared to pay through the nose to protect their own careers: if an outsourced project went horribly wrong, then they could always claim that at least they gave the gig to a major corporate brand which could be expected to deliver.
And so began the great IT consultancy scam. Blue-chip firms moved in: ignorant and arrogant, spouting buzzwords and often employing inexperienced graduates whom they pay meanly but charge out at outrageous day-rates, often for very mediocre work. Moreover, their grip on the sector is now a major driver behind mass immigration and the huge number of work visas being given out to foreign workers with IT skills. It is strongly rumoured that a new Indian trade deal will both entrench and extend this phenomenon, while little is done to address the poor skills and low productivity of British-born workers.
The great irony is that Philip Hammond and Jeremy Hunt were both successful entrepreneurs before going into politics – you might expect them to be on the side of the little guy. It’s not even as though IR35 generates huge amounts – one estimate is that its rollout to the public sector brought in a paltry £410million. Why not have kept the IR35 reforms and perhaps lower corporation tax just for small businesses, which after all suffered disproportionately during the pandemic? That said, we shouldn’t be too surprised – most people who go into Tory politics do so to join the establishment rather than disrupt it.
This sorry tale is one of so many similar parables. Our corporatist elites are engaged in the progressive extraction of value whether it be economic, social or cultural from Western societies. However, it would be wrong to interpret this as simple tale of corruption and conspiracy, of brown envelopes or handshakes over verbal agreements in gentlemen’s clubs. The truth is far more insidious and relies on two very basic aspects of human nature: often entirely subconsciously, we tend to align our self-interest with the people we interact with most, and then tend to work backwards from that self-interest to find moral justification for it. In a post-Christian world, the high-status faiths of today’s ultra-connected cognitive elites fulfil that role. The result is a rigid and blinkered groupthink akin to religious zealotry. Whereas an active conspiracy would require some level of self-awareness, our networked elites cannot even conceive that what they are doing is in any way wrong. They are therefore doomed to keep driving people into insurrection and revolt, whether it be Brexit, Trump, the gilets jaunes, Dutch farmers or Canadian truckers.
But don’t despair. The blindness of the elites is also their greatest weakness. Yes, it wins major battles, but it also loses them. Poor Liz Truss was a courageous if foolish general, and perhaps will go down in history as a failed Sir Robert Peel, taking on powerful vested interests and splitting her party in the process. If so, then let us hope that from the ashes of Toryism a new political force will arise to challenge the failed technocratic elites once again, and this time resoundingly beat them.
*As an IT consultant I declare an interest in this matter.