REC members fear that highly paid PSCs would agree with a hirer to return to them via a different employment business at the end of a contract and that in the intervening period, they might take a holiday or different assignment.

REC's legal counsel, Laura Cox QC is confident of success in the event that the Government refuses to amend their proposals. "The Confederation will have a genuine chance of winning a judicial review into PSC's inclusion, arguing they do not need, or want, the level of protection granted by the proposals," she said.

REC says the thrust of a judicial review would primarily be 'on the basis of irrationality, in that the regulations are disproportionate in terms of protecting PSCs in relation to the evil that they are apparently seeking to address.'

Speaking of the wider problems with the Act, Tim Nicholson- REC's Chief Executive, told Shout99 at a recent press briefing: "When the draft of the EAA was produced in 1999 we felt that the Government then had little understanding of agencies and their businesses. Anyone can start a recruitment business and there are few obstacles financial or otherwise to prevent them doing so. There are currently approximately 15,000 businesses employing around 80,000 people with a turnover of around £18 billion a year, £16 billion of which is with contracting staff."

Nicholson believes that the services of agencies are also misunderstood and understated. "The incredible growth over the past ten years means there is an immediate availability of staff," he said. "Where special skills are needed temporarily, we can chase and provide them for the company and this includes older contractors who would otherwise have less opportunity to work. Without us there would be less flexibility and a far greater reduction of skills."

Speaking of the implications of the Act in practice, Marcia Roberts- REC's Director of External Relations said, "80% of our members are small enterprises that cannot deal with large amounts of red-tape and the administrative burdens surrounding the implications of IR35. The CBI reports that the new rights could cost £12.3 billion to implement and these are intentions that the Government announced before any consultation had taken place. The Act represents both a threat and an opportunity for agencies as it could mean a greater scope to participate in markets however, no evidence has ever been presented to suggest that radical changes are necessary."

In its official response to the Government, REC states: "The temp-to-temp regulations (which will apply to many situations in which PSCs are involved because of the way the market for their services operates) will tilt the market for the services of these well paid and highly sought after contractors in favour of larger employment businesses. The regulations, in other words, reduce competitiveness to the disadvantage of small firms."

Citing Labour’s business manifesto where it accepts that ‘A well functioning labour market is one of the foundations on which successful businesses are built,’ Tim Nicholson said, "If the Government recognise the important role that the recruitment sector plays in the labour market then its future legislative programme should reflect this- we await this with interest!"

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Richard Powell, Shout99