No sick pay, no maternity pay: Chancellor targets employers' tax loophole that damages teachers' and nurses' rights

 

A tax loophole which allows firms to dodge around £100 million a year in National Insurance will be closed in the Budget, it was announced.

Chief Secretary to the Treasury Danny Alexander said it would target the use of offshore payroll services in tax havens such as Jersey and Guernsey.

Around 100,000 employees - mostly teachers, nurses and oil and gas workers - are believed to be paid in that way and could be unknowingly ineligible for statutory sick pay.

Mr Alexander was alerted to the loophole by one such worker who approached him at Inverness Airport - though he insisted he found it was already under investigation by officials.

"It is not just about the tax we get in, it is also the case that many employees will not know they are paid in this way," he told BBC Radio 4's Today.

"If their employer is not paying Employers National Insurance, unbeknownst to them, they may not then be entitled to statutory maternity pay if they become pregnant, they may not be entitled to statutory sick pay if they fall ill.

"This is not just something which has direct consequences to the Exchequer, costing us all hundreds of millions of pounds, it is also something that has a direct consequence for the workers concerned and that why it is so important we are taking this action."

Mr Alexander will hail the move against "shadowy intermediaries" in his speech to the Scottish Liberal Democrat conference later.

"British firms employing British workers must pay British taxes," he will say.

"This is just one part of a bigger package that we will announce at the Budget next week."

It was also reported today that George Osborne's Budget on Wednesday would also contain details of a £1.5 billion childcare scheme to help with nursery fees.

Families would get up to £2,000 in vouchers under the initiative, though it may not come into operation until 2015.

Earlier shadow chancellor Ed Balls has joined calls for emergency tax cuts in next week's Budget - saying Labour would applaud a cut in the basic rate of income tax to stimulate growth.

Mr Osborne is under pressure from the Tory right to make bold tax moves on Wednesday to kick-start the UK's flagging economy.

The looming prospect of a triple-dip recession and the recent loss of the UK's once-cherished AAA credit rating have heightened demands for a change of course.

But the Chancellor is expected to keep faith with his tough austerity programme, with Prime Minister David Cameron declaring the Budget would be about "sticking to the course".

In an interview with The Daily Telegraph Mr Balls said temporary borrowing to fund a cut in the basic rate of income tax would pay for itself.

Labour has proposed a temporary VAT reduction as the best way to stimulate recovery but Mr Balls said he would "applaud" any any type of tax cut.

"Something must be done now...you need some fiscal action," he said.

"If George Osborne announced a temporary cut in the basic rate we would applaud him because we would say, 'At last he is finally doing something to get some spending power back into the economy'."

Hopes the economy could grow in this quarter and thus avoid returning to recession were dealt a blow this week by a 1.5 per cent fall in manufacturing output in January.

Mr Osborne is tipped to announce extra investment in housebuilding and road projects - called for by leading business groups - and help for people to buy homes.

Drivers could be helped by the cancellation of planned fuel duty rises.

PA

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Client Accountant Team Manager - Reading

Negotiable: Ashdown Group: The Ashdown Group has been engaged by a highly resp...

Recruitment Genius: Account Manager

Negotiable: Recruitment Genius: You will also work alongside their seasoned sa...

Recruitment Genius: Assistant Property Manager

£15000 per annum: Recruitment Genius: Are you looking for your first step into...

Recruitment Genius: Mechanical Design Engineer

£25000 - £40000 per annum: Recruitment Genius: This innovative company working...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat