Serco accused of 'shameful scam' in moving staff offshore

Services company Serco has proposed to move almost 600 former Ministry of Defence workers offshore to avoid paying national insurance.

The plan has infuriated trade unions, which will hand in a petition of protest to Downing Street next week.

Serco won a contract in 1996 to run the Warship Support Agency of the MoD, which services sea vessels around the country. It must rebid for the part-privatisation deal in 2005, and says that to compete with foreign bidders, it must move its workers' employment contracts to Guernsey to save money on NI payments. In 2000 the Inland Revenue changed tax rules to let "mari- ners" avoid NI if the company they work for is offshore.

The operation is highly profitable, according to the subsidiary's accounts for 2001. Serco Denholm reported turnover of £39m and pre-tax profits of £4m.

The Transport and General Workers Union has questioned the legality of the proposal because the workers are mainly based on UK shores. It also fears they may lose employment rights.

The union's national organ- iser, Jack Dromey, has written to Defence Secretary Geoff Hoon, saying: "What Serco has done is engage in a shameful scam to cut costs by avoiding tax to win the competition.

"But the main responsibility lies with the MoD for creating the competitive climate which risks robbing British workers of their rights and the Treasury of revenue.

"Our members do not want to become tax exiles or lose their employment rights."

According to the 2001 accounts, Serco Denholm pays £16m a year in wages, and the union calculates that the Treasury will lose £1.8m a year.

A Serco spokesperson said the plan was still under discussion with unions and the MoD. "This option is only being considered to enable us to be competitive and to secure long-term security for our em- ployees," he said. "If, during consultation, it transpires that this option is not in the best interests of our employees, we will not take it forward."

Serco has been a successful MoD contractor, providing training and IT support for the Armed Forces. It is also a partner in managing the Atomic Weapons Establishment.