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

Arts & Entertainment
Ricky Gervais at a screening of 'Muppets Most Wanted' in London last month
tvAs the second series of his divisive sitcom 'Derek' hits screens, the comedian on why he'll never bow to critics who habitually circle his work
Arts & Entertainment
Don (John Hamm) and Megan (Jessica Paré) Draper are going their separate ways in the final series of ‘Mad Men’
tvReview: The suits are still sharp, but Don Draper has lost his edge
News
news
Life & Style
Going down: Google's ambition to build an elevator into space isn't likely to be fulfilled any time soon
techTechnology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
VIDEO
Have you tried new the Independent Digital Edition iPad app?
News
David Cameron sings a hymn during the enthronement service of The Most Rev Justin Welby as Archbishop of Canterbury, at Canterbury Cathedral last year
news
Life & Style
From long to Jong: Guy Pewsey outside Mo Nabbach’s M&M Hair Academy in west London before the haircut
fashionThe Independent heads to an Ealing hairdressers to try out the North Korean dictator's trademark do
Sport
Vito Mannone fails to keep out Samir Nasri's late strike
sportMan City 2 Sunderland 2: Keeper flaps at Nasri's late leveller, but Black Cat striker's two goals in 10 minutes had already done damage
Extras
indybest10 best smartphones
News
peopleRyan Gosling says yes, science says no. Take the A-list facial hair challenge
Arts & Entertainment
tvCreator Vince Gilligan sheds light on alternate endings
Life & Style
Google Doodle celebrates the 63rd anniversary of the Peak District National Park
tech
News
Paul Weller, aka the Modfather, performing at last year’s Isle of Wight Festival in Newport
people
Life & Style
Michael Acton Smith founded Firebox straight out of university before creating Moshi Monsters
techHe started out selling silliness with online retailer Firebox, before launching virtual creatures who took the real world by storm
News
Ethical matters: pupils during a philosophy lesson
educationTaunton School's policy of putting philosophy at heart of its curriculum is one of secrets of its success
Arts & Entertainment
Play It Forward: the DC Record Fair in Washington, US
musicIndependent music shops can offer a tempting alternative to downloads on Record Store Day
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

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

iJobs Job Widget
iJobs General

Online Advertising Account Executive , St Pauls , London

£26K-30k + Bonus, Private Medical Insurance, Company Pension: Charter Selectio...

Advertising Account Executive - Online, Central London

£25K-28k + Bonus, Private Medical Insurance, Company Pension: Charter Selectio...

Senior Infrastructure Consultant

£50000 - £65000 Per Annum potentially flexible for the right candidate: Clearw...

Public Sector Audit - Bristol

£38000 per annum + Benefits: Pro-Recruitment Group: Do you have experience of ...

Day In a Page

Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

Ricky Gervais: 'People are waiting for me to fail'

As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

Mad Men returns for a final fling

The suits are still sharp, but Don Draper has lost his edge
Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

Google finds a lift into space will never get off the ground

Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics

Is sexual harassment a fact of gay life?

Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics
Moshi Monster creator Michael Acton Smith: The man behind a British success story

Moshi Monster creator Michael Acton Smith

Acton Smith launched a world of virtual creatures who took the real world by storm
Kim Jong-un's haircut: The Independent heads to Ealing to try out the dictator's do

Our journalist tries out Kim Jong-un's haircut

The North Korean embassy in London complained when M&M Hair Academy used Kim Jong-un's image in the window. Curious, Guy Pewsey heads to the hair salon and surrenders to the clippers
A History of the First World War in 100 moments: A forgotten naval victory in which even Nature played a part

A History of the First World War in 100 moments

A forgotten naval victory in which even Nature played a part
Vespa rides on with launch of Primavera: Iconic Italian scooter still revving up millions of sales

Vespa rides on with launch of the Primavera

The Vespa has been a style icon since the 1950s and the release this month of its latest model confirms it has lost little of its lustre
Record Store Day: Independent music shops can offer a tempting alternative to downloads

Record Store Day celebrates independent music shops

This Saturday sees a host of events around the country to champion the sellers of well-grooved wax
Taunton's policy of putting philosophy at heart of its curriculum is one of secrets of its success

Education: Secret of Taunton's success

Taunton School, in Somerset, is one of the country's leading independent schools, says Richard Garner
10 best smartphones

10 best smartphones

With a number of new smartphones on the market, we round up the best around, including some more established models
Mickey Arthur: Aussie tells ECB to stick with Ashley Giles

Mickey Arthur: Aussie tells ECB to stick with Ashley Giles

The former Australia coach on why England must keep to Plan A, about his shock at their collapse Down Under, why he sent players home from India and the agonies of losing his job
Homelessness: Why is the supported lodgings lifeline under threat?

Why is the supported lodgings lifeline under threat?

Zubairi Sentongo swapped poverty in Uganda for homelessness in Britain. But a YMCA scheme connected him with a couple offering warmth and shelter
A History of the First World War in 100 Moments: When the world’s biggest shed took over Regent’s Park

A History of the First World War in 100 Moments

When the world’s biggest shed took over Regent’s Park
The pain of IVF

The pain of IVF

As an Italian woman vows to keep the babies from someone else’s eggs, Julian Baggini ponders how the reality of childbirth is often messier than the natural ideal