Just when you thought it couldn't get any worse, I hear news that the Government is set to remove the Staff Hire Concession, in effect forcing the providers of temporarylabour the charge VAT on not just the agency fee, but also the wages of the staff. Hardest hit will be the public services, who cannot reclaim the VAT. In effect the cost of agency cleaners for the NHS just went up by 15%. This robs both in-house and contracted out service providers of the short term flexibility that agency workers can provide. 150,000 jobs are potentially on the line.
The Evening Standard reckons this ,move could mean the end of temps in London, putting 25,000 jobs in London at risk - the majority of these are women's jobs. I wonder what Harriet Harman might do about that. Does she even know about it?
The decision to do this was announced in last year's budget, but that was well before the recession started.
Theresa May should take this up and try to force the government to abandon its plans.
I've said it b efore and I'll say it again - this giovernment understands nothing whatever about markets, economics, business, or, indeed, anything else - and I doubt they've even heard of the Law of Unintended Consequences...
ReplyDeleteWhen the NHS hires agency staff that is (of course) paid for by the taxpayer, via the NHS budget.
ReplyDeleteWhen VAT is charged that goes to the government.
The net effect of this change in regards to the NHS for the government is therefore nil. They take VAT for the wage, while paying that VAT through their NHS Budget. They are, in essence, taxing themselves.
However, those of a cynical turn of mind might consider a subtle implication here. If Labour wanted to cut the wage bill for the NHS, but could not be seen to do so for party political reasons, this would be a good method.
Simply add a government imposed tariff on the staff wages of the NHS, then refuse to increase the budget due to 'tough times' and they've clawed back the difference to central funds. Very stealthy.
What if their scorched earth policy is playing a long game? Tories get elected, the depression deepens regardless for a while. Inevitable. Then the attack is launched. Cuts in Public Spending and Investment (sic), 10 million unemployed and so on. Bingo back in the trough driving seat toute suite.
ReplyDeleteI do think that they are capable of this Party before Country process. They've been at for over 14 years, at least.
This is bizarre.
ReplyDeleteIf I recall rightly, Reed Employment successfully challenged HMRC several years ago about exactly this.
They'd been charging VAT on the whole lot and duly handing it over.
Some bright spark spotted this and they argued that VAT was only due on the 'service' element rather than 'pay'.
This is just as bad as when - dare I say - the Tories put VAT on fuel as a greenwash tax.
That instant 15% rise would be a real shocker for the lowest paid doing vital but unpopular jobs.
Steve - yes and no.
ReplyDeleteThe money may all wash around the drum in the end but each budget is ring-fenced so there would be less money to spend on employing people.
When I worked with the plod, as a public body we had exactly this issue.
In truth a lot of 'temporary' workers are actually long-term staff who are being hired as temps so the company can give them worse T&Cs than any 'core' staff. So if it became less economical to have the temps I'd have thought the purpose would be encourage them to switch to being permanent contracts.
ReplyDeleteVAT exemption was allowed from 1998 as a concession. Following extract from
ReplyDeletehttp://www.rec.uk.com/press/news/422
explains it:
>>The concessions were originally introduced as a temporary measure in 1998 to maintain a level playing field between employment businesses. They are being withdrawn partly because changes to the legislation affecting employment businesses means that there is no longer a need for the concessions and partly because it is the view of HMRC that they are unjustifiable in terms of UK and EU VAT law.<<
UK and EU VAT law eh? So the Tories would have to impose VAT as well as dictated by our EU masters.
I watched a programme last night about Mrs Thatcher and how the Tories got it wrong by banging on about the EU and immigration for the 3 elections following her demise. Now they are getting it wrong by NOT banging on about the EU and immigration.
Iain, This loophole has been well known for years and industry has been consulted about the change that was announced last year.
ReplyDeleteLabourboy's point is correct. This is what indeed will happen.
Unless I have missed something, this story has little traction. The UK is the only country I know that has this loophole. It is standard to apply this type of tax even in counties outside the EU
"In effect the cost of agency cleaners for the NHS just went up by 15%" -- its perhaps one of the benefits of PFI that the charges include for maintenance.
ReplyDeleteMr Tierney is wrong. He assumes that the govt will compensate the NHS etc for the extra tax they are paying. this will ot happen.
Its an old scam. Labour put more and more responsibilities on Local Govt but do not provide the one to cover the cost. Thus council tax goes up.
Oh dear - sorry I am back again.
ReplyDeleteThe rights or wrongs of temporary work arrangement are all very well.
But the fact is that the govt at a difficult time are putting yet another tax on employment.
King Lear, I’m afraid this can’t even be blamed upon the Law of Unintended Consequences. The VAT amendment served no other purpose.
ReplyDeleteThey truely are unravelling...just a pity so many are having to suffer the conseqences...its just like 1978/9 except for Brown read Healey...useless,incompetent and Socialist...
ReplyDeleteYet another own goal. Doubtless there will be an article critical of this move over at... Oh. No. Apparently not.
ReplyDeleteWhat drivel Iain. The Evening Standard 'reckons' eh? What a reliable source that is.
ReplyDeleteJerk your knee, don't bother to engage in the argument, call it drivel. A typical Chris Paul response.
ReplyDeleteSo no jobs will be threatened by putting VAT on wages. What planet do you live on?
A fair point. So why not start the ball rolling by telling us how you worked out that 150,000 were being put out of work. Even the Evening Hitler article doesn't make that claim.
ReplyDelete