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

News
Emma Watson has become the latest target of the 4Chan nude hacking scandal
peopleThreats follows actress' speech on feminism and equality at the UN
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Sport
David Moyes and Louis van Gaal
football
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
life
Life and Style
life
Arts and Entertainment
Tennis player Andy Murray's mum Judy has been paired with Anton du Beke for Strictly Come Dancing. 'I'm absolutely delighted,' she said.
tvJudy Murray 'struggling' to let Anton Du Beke take control on Strictly
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Sport
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
rugby
Arts and Entertainment
Worldwide ticket sales for The Lion King musical surpassed $6.2bn ($3.8bn) this summer
tvMusical is biggest grossing show or film in history
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
News
i100
Life and Style
food + drink
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

Business Analyst/ Project Manager - Financial Services

£60000 Per Annum: Clearwater People Solutions Ltd: Our client in the Financial...

English Secondary Teacher

£110 - £140 per day: Randstad Education Cambridge: English Teacher needed for ...

Year 3/4 Teacher - Immediate Start

Negotiable: Randstad Education Chester: Year 3/4 Teacher Needed in Flintshire ...

English Teacher

£85 - £125 per day: Randstad Education Chester: Job Opportunity for Secondary ...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits