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Surge in gig economy work and zero-hours contracts costs UK £4bn in lost taxes

£75m per week is equivalent to a quarter of England's social care bill

Ben Chapman
Tuesday 14 February 2017 15:03 GMT
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The sharp rise in the number of people working without guaranteed hours or basic employment rights, such as sick pay, holiday pay and a guaranteed minimum wage, has lowered the income tax and National Insurance take
The sharp rise in the number of people working without guaranteed hours or basic employment rights, such as sick pay, holiday pay and a guaranteed minimum wage, has lowered the income tax and National Insurance take (Reuters)

An explosion in the number of people in insecure employment is costing the Government £4bn a year, according to a new report published on Tuesday.

The sharp rise in the number of people working without guaranteed hours or basic employment rights, such as sick pay, holiday pay and a guaranteed minimum wage, has lowered the income tax and National Insurance take, the TUC found.

Self-employed workers also earn significantly less on average than salaried employees so are more likely to rely on in-work benefits such as tax credits and housing benefits, the TUC said.

The rise in low-paid self-employment accounts for just over half of the £75m-per-week bill, with the surge in those working zero-hour contracts responsible for the other half. The amount is equivalent to a quarter of England’s social care budget.

The report warns the problem could get worse if current trends continue. Insecure working has grown by more than a quarter over the past five years and now accounts for 1 in 10 (3.1 million) UK workers.

TUC general secretary Frances O'Grady said: “The huge rise in insecure work isn't just bad for workers, it's punching a massive hole in the public finances too.

“Zero-hours contracts and low-paid self-employment are costing the economy billions every year in lost tax revenues. That's money that could be spent on stopping the crisis in our schools and hospitals and making sure every elderly person gets decent care.

“Bosses who employ staff on shady contracts are cheating all of us.”

Ms O’Grady urged people to join unions to combat the issue. “Workers in unionised workplaces are twice as likely to be on better-paid secure contracts.“

The news comes as the Government launches an independent review into whether “employment regulation and practices are keeping pace with the changing world of work”.

Matthew Taylor, Tony Blair’s former policy chief, was appointed to lead the review in October last year and on Tuesday began a nationwide tour at the Google campus in London before visiting Belfast, Cardiff, Nottingham, Maidstone and Glasgow.

A slew of recent court cases have put the gig economy under scrutiny. On Friday, the Court of Appeal dismissed the appeal of Pimlico Plumbers, which had claimed it did not need to pay one of its workers sick pay because he was self-employed.

The plumber, Gary Smith, had been working for Pimlico for six years, ostensibly as a contractor.

In October 2016, a London employment tribunal found ruled that Uber’s contracts with its drivers resorted to “fictions, twisted language, and even brand new terminology,” in order to present drivers as indirect contractors rather than workers.

Judges said the “notion that Uber in London is a mosaic of 30,000 small businesses linked by a common 'platform' is in our minds faintly ridiculous”, adding that Uber's arguments were “absurd”.

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