Abbott will now have up to three years to contemplate his fundamental error which will be especially bitter because he was alerted about the power of the issue countless times by both Business Spectator and some of his shadow ministers.
But because most of the 2 million independent contractors did not realise that the next ALP government wanted to change the Tax Act to make them employees, the issue did not show up on Liberal Party polling. Abbott paid the penalty.
Once in power, the new government's deal with the Greens saw Julia Gillard quickly reverse her carbon tax policy while the cabinet reshuffle saw Nick Sherry, who was a strong advocate of decimating independent contracting, shifted to small business, and Bill Shorten given Sherry's old job of Assistant Treasurer.
Together Sherry and Shorten could operate to achieve the union agenda to destroy independent contracting. This agenda is helped because two staunch supporters of independent contractors, former finance minister Lindsay Tanner and former small business minister Craig Emerson, are now out of the fray. Tanner has retired from politics and Emerson has been moved to the trade portfolio.
Suddenly the silencers are off. The unions wanted independent contractors' blood and whereas in the election campaign attacking independent contractors had not been part of ALP policy, now it clearly is.
Abbott was fooled by this, and he has three years to learn from his mistake.
However, although Bill Shorten is one of the most talented people in the parliament, if he delivers Abbott the top job in three years' time by decimating independent contracting, then his political career will be in ruins.
I think he is too smart for that, but he has several problems. He is under clear pressure to deliver for the unions and has to deal with a Board of Taxation Review and the Henry report advocating change. And just as under the Rudd government the union pressure caused Julia Gillard's original IR proposal to be dramatically changed, so Shorten will not find it easy to satisfy the unions and save independent contractors and his career.
His first step has been to use a well tried political strategy - set up a committee of union and industry people. We will know immediately whether Bill has caved in by who is appointed to the committee. Independent contracting is not understood by most industry bodies and it will be easy to pick one that knows nothing about it. Shorten's committee would then be a Kangaroo Court for independent contracting.
You can be certain that one of the world experts on independent contracting, the chief of the Independent Contractors Association, Ken Phillips, will not be on the panel. That would make it impossible to achieve the union agenda.
Phillips regularly contributes to Business Spectator and in his latest comment explains how the union agenda will decimate independent contracting.
He explains that the plan being considered by Sherry and Shorten is to move away from the current simple test - consisting of three questions - to determine whether someone is a contractor. Instead, the government is contemplating installing an complicated system where independent contractors would be required to differentiate between income from capital - which would returned to the person who supplies the capital - and income from labour, which would be attributed to the person who supplied the labour. It's an absolute nonsense designed to force plumbers, computer contractors and do on to be employees.
Shorten and Sherry's greatest problem is that independent contracting gives people flexibility and is one of the biggest drivers of Australian productivity. The current tax rules, for the most part, are working brilliantly for all parties, including the tax office.
But the unions want independent contractors as employees so they can be members. Gillard has thrown one of her king makers a chalice that could destroy his political career and his aspirations to be Prime Minister.
This article first appeared on Business Spectator.
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written by Ray Borradale, September 29, 2010
