Rise in insecure work costs Exchequer £4bn a year warns TUC

By agency reporter
February 15, 2017

The growth of insecure employment – working without guaranteed hours or baseline employment rights – is costing the Exchequer an estimated £4 billion a year, according to a new Trades Union Congress (TUC) report published yesterday (13 February 2017).

The rise in low paid self-employment accounts for just over half (£2.1 billion) of this bill, with the government collecting billions less in income tax and National Insurance contributions. And the surge in zero-hours working has left an additional £1.9 billion hole in the public finances, says the study.

The report, The Impact of increased self-employment and insecure work on the public finances, uses tax and benefit modelling to show the impact of the growth in insecure work since 2006. It shows how the growth of low-paid self-employment and zero-hours contracts has led to a fall in government revenues because:

  • Low-paid self-employed workers and those on zero-hours contracts earn significantly less than regular employees and therefore pay less tax and national insurance;
  • This also makes them more likely to need to rely on in-work benefits such as tax credits and housing benefit;
  • Even when the self-employed do earn as much as regular employees, the tax is structured so that they pay less.

This has led to a lower tax take and higher spending on in-work benefits. The report says that the total being lost to the Treasury from the rise in precarious working is more than £75 million a week. This is the equivalent of more than a quarter of England’s social care budget.

The report warns the problem could get worse in the future. The TUC estimates that insecure working has grown by more than a quarter over the past five years and now accounts for one in 10 (3.1 million) UK workers.

The number of self-employed workers who are low-paid has increased by more than a fifth (21 per cent) over the past decade, says the TUC.

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. That’s why we desperately need more decent jobs that pay a fair wage.

“Getting more people into unions is key. Workers in unionised workplaces are twice as likely to be on better-paid secure contracts.”

* Read the report The Impact of increased self-employment and insecure work on the public finances here

* TUC https://www.tuc.org.uk/

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