Labour victory on July 4th won’t trigger summer Budget, says Reeves, even though contractors look on, unmoved

Rachel Reeves has ruled out a summer Budget if Labour wins the General Election on July 4th.

The shadow chancellor’s ruling out should relieve contractors, given that Budgets historically upend how such freelancers intend to operate.

And a tax expert had already forecast a Reeves ‘emergency’ budget, as Labour are set for the second largest election victory since 1924.

'10 weeks' notice'

But asked after a speech to Rolls Royce whether she would unveil a summer Budget if she enters Number 11 on July 5th, Reeves told reporters:

“The OBR requires 10 weeks’ notice to provide an independent forecast ahead of a Budget.

“And I’ve been really clear that I would not deliver a fiscal event without an OBR forecast.”

Decoded, Reeves’ comment means that a Labour victory on July 4th would result in an autumn Budget in September -- at the earliest.

'Reeves' pledge of no emergency Budget is a relief'

"Labour will NOT hold an emergency budget if it wins...which is a relief as they're nearly always a bad idea," says a wealth adviser.

“Reeves says that any budget will be with OBR forecasts only, which take 10 weeks to commission.   

“This means we are looking [possibly] at a November budget [in the instance Labour wins]”, continued the adviser, James Quarmby, founder partner of Stephenson Harwood.                                                         

Quarmby added in a post: “It’s inconceivable that the non-dom reforms will be part of that, as the government will need much more time to consult.  

“However, there will likely be another fiscal event in March 2025, where it’s possible part of the non-dom reforms will appear.”  

'Risk'

Accountant Jeffrey Lermer is also pleased that Reeves’ comments remove what he calls the “risk” of a Labour emergency Budget.

But his three-fold advice in the event a summer Budget goes ahead is still likely to interest contractors who have ISAs, pensions and companies.

As Labour “have suggested they will simplify the ISA environment, “and simplify rarely means improve,” max out your £20k allowance.

Second, with at least a possibility the £60k annual pension allowance with further contributions of £140k, will be cut, max out that too.

Thirdly, warned Lermer, boss at JLA Chartered Accountants, “there have been persistent rumours that Labour wants to equalise rates” of Capital Gains Tax.

'No return to austerity if Labour are elected'

Yesterday, Labour tried to quash those rumours with a party spokesperson telling the Guardian that despite party members apparently pressuring Reeves to hike CGT:

“Nothing in our plans requires any additional tax to be increased, and there will be no return to austerity if Labour are elected on 4 July.”

The list on what Labour won’t do, or will refrain from unveiling, if it wins on July 4th doesn’t contain just “CGT hike” and an “emergency Budget”.

And it’s not just Labour which is preferring to draw red lines rather than pledge to contractors and other self-employed workers.

'Two main parties have promised not to raise VAT'

“You’ll take it, but the Tories and Labour are missing the point [even though] it's great that the… two main parties have promised not to raise VAT,” observes Qdos CEO Seb Maley.

Further referring to party pledges made outside of the yet-to-be published Tory and Labour manifestos, Maley asked:

“What about the key issues impacting the millions of other self-employed workers?

“The [April 6th 2023-hiked] corporation tax rate; IR35 and the off-payroll rules, [and] HMRC’s treatment of taxpayers.

“Surely, these points will be addressed in the coming weeks – after all, the self-employed could easily decide this election.”

'Open goal'

Since the IR35 contract review expert was speaking however, there still haven’t been any new pledges to self-employed contractors.

Even a televised head-to-head debate between prime minister and Tory party leader Rishi Sunak and Labour leader Sir Keir Starmer saw neither politician mention (or even allude to) the self-employed.

Mr Maley reiterated: “Whichever party [eventually] hones in on the needs of this vital group of workers stands a much better chance of winning the general election next month. It’s an open goal.”

Andy Chamberlain, IPSE’S policy wonk, is also scratching his head as to why freelancers haven’t been wooed since the election date was set.

He points that out both main parties haven’t even committed to raising the personal allowance until 2028, “an effective tax rise”.

'Labour's Worker proposal is its most promising lead for contractors'

Policy director at the Association of Independent Professionals and the Self-Employed (IPSE), Mr Chamberlain will also say next week in an article exclusively for ContractorUK:

“The most promising lead is Labour’s plan to unearth the time capsule that is our employment status rules.

“The focus of their ire is with the different degree of protections that come with the status of ‘Worker’ and ‘Employee’, with plans to roll the two into a single status of ‘Worker’ and ‘for all but the genuinely self-employed.’”

'Umbrella regulation would be a smart starting point for Labour'

At Qdos, CEO Mr Maley has pointed out that Labour has published (since the election announcement), ‘How we will make the tax system fairer.’

'But he says the document is off-target.

“My opinion, for what it’s worth, is that regulating the umbrella industry would be a smart place to start,” he recommended.

The Freelancer & Contractor Services Association is asking the same for umbrella companies -- of whichever party takes office on July 5th.

In particular, the association says it wants the “introduction of regulation of the payment intermediary market.”

'Protects workers'

FCSA’s CEO Chris Bryce continued: “We will continue to work with government and officials to ensure that any proposed regulatory environment works for every party involved in the supply chain, and protects workers from rogue companies and unlawful schemes.”

Bryce said as much in a ContractorUK exclusive last week, alongside his call for IR35 to be reviewed with a view to being overhauled.

Some contractors don’t think that package -- as a demand -- goes far enough.

“That's a pretty weak set of proposals at this point in the game,” one contractor wrote in reply to Bryce’s piece.

“IR35 is a dumpster fire disaster from so many different perspectives.

“It needs abolition straight away. No ‘ifs’ no ‘buts.’ When that's done we can think about other measures of reform.”

'Demand the repeal of IR35 reform'

Technology staffing firm VIQU agrees.

“Contractors, it's time to take a stand and DEMAND the repeal of IR35 [reform]," the firm appealed on Tuesday.

“There are 4.25 million self-employed people in the UK. If just 10% of us bombard our MPs with demands to review the Off-Payroll working Rules (IR35), the political pressure will be immense.

“Let's face it. IR35 is a poorly conceived regulation that punishes the very backbone of our economy -- self-employed professionals.

“We're not just statistics; we're the driving force behind innovation and growth. It's time to unite and make our voices impossible to ignore.”

'Insist on an IR35 review as a condition for your vote'

VIQU’s managing director Matt Collingwood says contractors should “insist” that their constituency’s MP candidates at least commit to an IR35 review “as a condition for your vote.”

“Demand a phone call or a meeting -- make them understand that our votes come with conditions.

“This is a battle for our livelihoods. Applying relentless pressure on MPs will force the change we need, but it requires collective action,” Collingwood says.

“If we don’t stand up now, we'll continue to be exploited. Find out who your local MP candidates is using this link, and it includes their email address.”

'Pinch of salt'

But Colin Scott, a self-employed Test Analyst, doesn’t think an umpteenth review into the much-disliked framework is the answer.

“No review [of the OPW rules] is needed, it needs [to be] binned. The last review was from the Tories, [but] that review turned out to be how to implement [the] off-payroll [rules]. So [we should be] taking all these MPs’ promises with a pinch of salt.”