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Mr. Bermingham: You are joking.
Mr. Fabricant: Perhaps not barristers. I exclude the hon. Gentleman from that remark, although I shall refer to a couple of inaccurate points that he made earlier. The Labour party is unfamiliar with what business men--even small business men--have to endure. If one is to be taxed at a particular level, there must be a benefit.
Mr. Beard: Labour Members' derision had nothing to do with a person going bankrupt. It was prompted by the absurdity of attributing going out of business to legislation that has not yet been passed.
Mr. Fabricant: As we say in the Chamber, the hon. Gentleman makes his point in his own way, and his own way is interesting indeed.
Mr. Bercow: I am grateful to my hon. Friend for giving way again as he has given me the opportunity to elucidate
for the benefit of the hon. Member for Bexleyheath and Crayford (Mr. Beard). Does my hon. Friend understand that my constituent Mr. Mark Gillis is ceasing to trade now because he has the capacity to see ahead? He is aware beyond doubt that he will be clobbered by the Government's proposals and that remaining in business will not be worth his while. He is giving up the struggle against the Treasury leviathan.
Mr. Fabricant: Either way, it is interesting to speculate: will Mr. Mark Gillis choose to stay in this country and claim from the state as unemployed or will he become an opportunity cost by going abroad to trade, thus reducing this country's status? That effect will be magnified many thousands of times as the high- technology and software writing position of rival countries improves.
IR35 is nothing new. Such a measure was proposed by the Inland Revenue in the early 1980s, the late 1980s and the early 1990s as a tax-producing dodge--a way of raising money for the Treasury. Previous Conservative Chancellors rejected that method outright because they recognised the effects that it would have on small business men and sunrise industries in particular. What is new is that this Government, because they are unable to understand the requirements for producing a high- technology-oriented nation, have fallen for it hook, line and sinker, and 60,000 people will be affected. Perhaps they will all go abroad. Then the Government can say, "We've got 60,000 fewer people. That is why we are allowing so many asylum seekers into this country." [Interruption.] I shall not pursue that line, Mr. Martin, because you would rule me out of order, but there is no other logic to it. Surely the Paymaster General and the Chancellor are not naive enough to fall for a particular proposal even though previous Chancellors refused to do so. That would be absolutely wrong.
Dawn Primarolo: I am sure that the hon. Gentleman did not want to make a gratuitous and unacceptable comment in referring to asylum seekers. May I help him? If he wants to criticise the Government on the fast-tracking of work permits, he is entitled to do so. However, every Member of the House recognises that pouring oil on the flames represented by the hysterical language that some Members use about asylum seekers has no place in the Chamber.
The First Deputy Chairman: Order. I shook my head earlier to show that I would not allow a debate on asylum seekers. Points have been made by both sides so it will be best if we return to the debate on the clause.
Mr. Fabricant: Thank you, Mr. Martin. I would not like to create a situation in which the Paymaster General can be even more pompous and patronising than usual.
A couple of interventions on my hon. Friend the Member for Croydon, South (Mr. Ottaway) showed a lack of understanding of the effect of IR35, and the hon. Member for St. Helens, South (Mr. Bermingham) asked an interesting question of the hon. Member for Kingston and Surbiton (Mr. Davey): what is the difference between a lawyer and a worker in a high-tech software industry? Let me answer that. I put it to him that there are two clear differences. First, as a barrister, he is self-employed and already enjoys all the benefits of not being hit by IR35.
When the Bill is passed, he will retain those benefits, but people in high-tech industries will not. In effect, they will be on schedule E, while he is on schedule D.The second difference is more profound. As a lawyer, the hon. Gentleman does not have to invest quite so much in technology. He has to invest in books and needs access to the internet, but I am not convinced that he requires access to as much software and chip writing as those who work in the high-tech industries. He also does not have to travel to seek work. If he had to go to Aberdeen to represent an oil company, he would be retained by a solicitor and would already have the contract. People seeking a contract to write software may travel to Aberdeen, not win the contract and be unable to claim travel and accommodation expenses.
Sir Nicholas Lyell: My hon. Friend points up another unfairness between IT contractors, on whose behalf we are speaking, and self-employed people such as myself and the hon. Member for St. Helens, South (Mr. Bermingham). I have returned to private practice and I know that barristers are spending a lot of money on IT as well as on books and retraining. However, they are not restricted to 5 per cent. of their gross earnings whereas IT contractors, who are at the cutting edge, are being so restricted. I want the Government to justify that. Can my hon. Friend help me?
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Mr. Fabricant: Sadly, I cannot help my right hon. and learned Friend--and, even more sadly, I doubt whether the Paymaster General will be able to help him either.
It is clear that those who will be hit by IR35 will experience all the penalties and none of the benefits. We have already heard that they will receive no sick-pay benefit, no holiday-pay benefit and no unemployment benefit. They will not be able to charge equipment against tax; nor will they be able to charge their travel and accommodation.
We are discussing a provision that was rejected by Conservative Chancellors, by Australia and Germany and, to an extent, by the United States. I ask the Minister to check with her officials after the debate to establish whether the information that she gives is wholly correct, because she will find that in some American states there is no IR35 provision.
Yet again, Labour has demonstrated that it is no friend of business. Yet again, it has accepted tax-raising schemes proposed by the Inland Revenue and rejected by Conservative Chancellors. Yet again, Government spin doctors have been dragooned into demonising small high-tech businesses in sunrise industries by name- calling--by branding them tax-dodgers. Yet again, Labour has shown itself to be of the deepest red hue: while pretending to be "new Labour", it has driven those that are part of the enterprise culture into a new and more damaging brain drain.
Mr. Bermingham: I did not intend to make a speech, but when I hear an argument so misused and language so abused in the making of terrible points that have no merit, I feel that I must deny my natural self-restraining principles.
The hon. Member for Lichfield (Mr. Fabricant) has done it again. I do not know whether it is the time of the month or the movement of the moon that produces the rants, but they occur with periodic frequency. The hon. Gentleman really is being rather silly--and I say that with the greatest respect.
Let us suppose that I am an information-technology contractor, and an expert in the field. Let us suppose that I suddenly decide that the tax regime will be against me, and resolve to take myself to Paris, Frankfurt, Dublin or another European capital or major city and flog my services from there. In that event, I would find myself paying tax in Paris, Frankfurt or Dublin, where personal taxation is higher. Oh dear! It seems that that would not be a very wise move.
I realise that, as a humble barrister, I do not live in the whiz-kid world of today; I live in the world of yesterday. Let me gently remind the hon. Member for Lichfield, however, that I was once a senior partner in a firm that employed hundreds and hundreds of people, and today employs thousands. I have just a little bit of knowledge about the running of large businesses with million-pound turnovers: I speak on the basis of experience rather than ignorance.
Mr. Ottaway: That was a long time ago.
Mr. Bermingham: Yes, but there is a funny thing about some of us. We may move to a different side of our profession, but we keep in touch with our former colleagues, and we therefore keep up to date with what is happening--shock, horror.
Be that as it may, let us suppose that I am an IT consultant, or perhaps an engineer. Why do we not hear much about the Institution of British Engineers and the engineering consultants? Why do we not hear much about surveyors, chartered accountants, or, indeed, specialist pharmacists and forensic scientists who act as sole practitioners and consultants? We hear nothing about those people, who are all self-employed. That is because, when they set out to be self-employed, they set themselves up in a way that justified the tax allowances and expenses that they could claim. How do they do that? Well, they charge a fee for their services, and if they earn more than £60,000 a year gross--I think that that is the current turnover--they charge value-added tax, which is, of course, collectable and payable. They then find themselves in the interesting position of having to finance their own expenses and overheads. In my case, that will be chambers fees; in the case of pharmacists or forensic scientists, it may be laboratory fees. They will offset the costs against their incomes, which will result in a net figure on which they will pay tax in the normal way.
There is, however, a risk in being self-employed. Self-employed people are not paid during their holidays. They are not paid when they are sick, so they cannot succumb to any illness unless they are insured against it. If they are made redundant--if they are no good, and are out of a job--they do not receive unemployment benefit. That is the risk.
If IT consultants set themselves up in the same way, they must take the same risks as the rest of us who are self-employed. I am not here to say whether that is good or bad; but if there are dodges that mean that some people receive holiday and sickness pay and all the rest while
pretending to be self-employed, and if that is not open to those who are self-employed, should there not be a level playing field? Let me tell the hon. Member for Lichfield and the hon. Member for Kingston and Surbiton (Mr. Davey) that there are ways of organising one's affairs to ensure that one is genuinely self-employed and, as such, taxed genuinely. There are, however, risks and disadvantages in being self-employed, from a taxation and from a personal point of view.
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