Moves to scrap a tax system blamed as a key factor in the driver shortage that gripped the UK during the pandemic have been welcomed by industry leaders, but amid accusations they have come too late.
In his mini budget today, Chancellor Kwasi Kwarteng announced he would repeal the IR35 off-payroll working rules introduced in 2017 and 2021.
First brought in for public sector workers, the rules require businesses to assess whether contractors should be taxed as employees rather than as self-employed.
The impact left a vast number of lorry drivers who were working as freelancers withdrawing their services rather than becoming PAYE employees. It was seen as a major factor in forcing companies to offer staff huge pay rises.
Business leaders today also expressed their “huge frustration” at the expense and upheaval companies in the supply chain had gone through to comply with legislation, only for it to be swept away by Liz Truss’s new regime.
Throughout last year, former PM Boris Johnson faced urgent calls from haulage groups to repeal the laws amid a shortage of up to 100,000 drivers. The Road Haulage Association, Eddie Stobart, the FDF, the British Meat Producers Association and the BBPA all blamed the system for contributing to labour shortages, alongside Brexit and the Covid pandemic.
“My instant reaction to today’s announcement is what an incredible waste of time and money”, said Shane Brennan, CEO of the Cold Chain Federation. “I think a lot of my members will be shellshocked, especially when they think of the huge amount of money and investment they have had to put in in changing wage structures. I don’t think they will now suddenly revert.”
However, While Brennan said labour shortages were now nowhere near as extreme as in 2021, he nevertheless welcomed the possibility of extra flexibility for transport operations.
“Companies will welcome the chance to flex their workforce at time of peak demand such as Christmas, which this provides.
“Also it needs to be borne in mind that a lot of the workers paying IR35 were European workers and we saw a significant downturn in their number during the pandemic.
“A lot of them went home and one of the reasons they didn’t come back was because they didn’t want to become PAYE employees on UK companies, so it’s possible that more will come back after this.”
FWD CEO James Bielby said: “We welcome steps by the government to revisit IR35 rule changes. The reforms of 2021 contributed to the HGV driver shortage which plagued the wholesale sector. We are keen for the government to find a solution which supports self-employed workers and protects our vital supply chains.”
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