The Government’s failure to clamp down on insecure, low-paid work is costing the Treasury £10 billion a year, a new report from the Trades Union Congress (TUC) has warned.
It said low paid self-employment, zero-hours contracts and other forms of “precarious” work are “starving” the public purse by reducing the government’s tax take and increasing social security pay outs.
The TUC said that low paid self-employment is costing the exchequer £9.7bn alone each year whilst zero-hours contracts are punching a further £614million hole in the public finances.
The research – which uses the latest tax and benefit modelling – says this “eye-watering” cost to the Treasury is the result of low-paid self-employed workers and those on zero-hours contracts earning significantly less than regular employees and therefore paying less tax and national insurance.
It added it is also the result of people stuck in low-paid self-employment and on zero-hours contracts being more reliant on social security payments to top up their incomes as well as tax rates being lower for self-employed workers.
The report shows that just a one per cent rise in insecure work – as a proportion of the wider UK workforce – would wipe out nearly £1bn extra from tax receipts.
The TUC says the blame for the hit to tax revenues “lies squarely with the government” after more than a decade of inaction.
More than a million people are currently on zero-hours contracts and 3.6million people in total are in insecure work, including those in low-paid self-employment.
Whilst the union body supports legitimate self-employment, it says too many people are pushed into false self-employment by employers who want to cut their tax bill and deny workers basic rights.
The report says the total being lost to the Treasury from low-paid, precarious working is more than £192million a week.
The TUC argues this money could have been spent on vital public services, which have been “cut to the bone” after twelve years of under-funding.
Today’s report is published as the union body calls on the government to “stick to its word” and deliver its long overdue employment bill at the Queen’s Speech this week.
The employment bill was first promised in December 2019 as the Prime Minister vowed to make Britain the best place in the world to work.
But reports suggest the Government will shelve the legislation, despite ministers repeatedly committing to bringing forward a bill.
The TUC says that without action to tackle precarious work, vulnerable workers and the public finances will continue to suffer.
Frances O’Grady, TUC General Secretary, said: “Britain’s insecure work epidemic isn’t just punishing workers – it’s starving the public finances too.
“The government’s failure to clamp down on shady employment practices is costing the Treasury a fortune every year. That means less funding for our cash-strapped hospitals, care homes and schools.”
“The time for excuses is over. Ministers must stick to their word and deliver the long overdue employment bill. Leaving insecure work to flourish unchecked would be an act of betrayal. It would send a green light to bad bosses to carry on cheating their workers and the taxman.”
The TUC is calling on the government to use an employment bill to ban practices like zero-hours contracts and give all workers the same floor of rights currently enjoyed by employees.
It also wants a crackdown on bogus self-employment by introducing a statutory presumption that all individuals will qualify for employment rights unless the employer can demonstrate that they are genuinely self-employed as well as penalise employers who mislead staff about their employment status.
A Government spokesperson said: “We are committed to building a high skilled, high productivity, high wage economy that delivers on our ambition to make the UK the best place in the world to work.
“This includes ensuring workers’ rights are robustly protected while also fostering a dynamic and flexible labour market.”