Media and entertainment contractors should be on the payroll and paying more tax, the Commons Public Accounts Committee (PAC) tells BBC’s management. But that will ultimately increase costs, cut value for the taxpayer, reduce quality and make the BBC less competitive. How is the BBC’s management to resolve this conundrum?
The BBC’s proposed new employment test threatens to drive legitimate contractors and freelancers into Pay As You Earn (PAYE). This means potentially significant additional costs for the BBC in the form of employer’s National Insurance Contributions (NICs) and a higher salary to compensate talent for lower net income. That’s assuming talent will want to continue working for the BBC under the new regime, which is unlikely in the case of many performers. Rather than become BBC employees, they will be lured to more lucrative contracts with rival broadcasters, remaining as contractors with the flexibility and improved earnings potential that offers.
Was this double whammy of increased costs and reduced quality what PAC chairman Margaret Hodge MP had in mind, when branding the use of limited companies by public sector contractors and freelancers as “staggeringly inappropriate”? Will the negligible amount of additional tax collected even pay for Deloitte’s review of the BBC’s freelancer arrangements?
What really is “staggeringly inappropriate” is for MPs to be instructing public sector managers to disregard their imperatives to seek maximum value for license- and taxpayers, instead forcing them into choosing a high cost, low quality procurement strategy. That’s exactly the outcome the PAC is driving the BBC towards.
The BBC’s new employment test, to be developed in association with HMRC, threatens to leave the Corporation taking on more expensive, less ‘valuable’ employees as the best talent jumps ship.
After all, any test devised by HMRC is bound to classify the maximum number of workers as employees – HMRC would not be doing its job if it did otherwise. Involving HMRC in creating the test sets a dangerous precedent: the tax gathering agency’s role is to enforce the rules, not make them; that’s what we elect MPs for.
Thankfully, the BBC’s new employment test won’t have a statutory footing. That is fortunate, given that three of the four principles the BBC is planning to adopt, according to its Review of Freelance Engagement Model, have little or no basis in case law.
It is also fortunate that the fourth, control, will have a different application in the media and entertainment sector than it will in the wider contracting sector. Many entertainers are told where, when, what and how to perform their role whilst on-air, in a way that a typical IT, engineering or interim management contractor cannot. This may, we hope, reduce the likelihood that the BBC’s employment test will be applied in a broader context.
So, where does this leave the BBC’s management? Somehow, it must navigate a course between the PAC’s demands and its duties towards licence-payers. Until more details about the BBC’s employment test are released, it is difficult to assess which course the BBC will favour: slavish adherence to the PAC and the resulting loss of value for us all; or a more pragmatic business-as-usual approach to retain the best talent and offer us all best value.
Whatever the eventual outcome, the PAC has presented BBC management with a conundrum from which the conflicting instructions and duties arising will be devilishly difficult to reconcile.