Insecure, low-paid work is “starving” the public purse of billions in lost tax revenues and pushing up social security payments, report shows
Union body calls on government to announce the employment bill – warning that failure to tackle precarious work would be an “act of betrayal"
The government’s failure to clamp down on insecure, low-paid work is costing the Treasury £10 billion a year, a new TUC report has warned today (Monday).
The report reveals how low paid self-employment, zero-hours contracts and other forms of precarious work are “starving” the public purse by reducing the government’s tax take and increasing social security pay outs.
The report shows that low paid self-employment is costing the exchequer £9.7bn alone each year.
And zero-hours contracts are punching a further £614 million hole in the public finances.
The research – which uses the latest tax and benefit modelling – says this “eye-watering” cost to the Treasury is the result of:
Low-paid self-employed workers and those on zero-hours contracts earning significantly less than regular employees and therefore paying less tax and national insurance.
People in stuck in low-paid self-employment and on zero-hours contracts being more reliant on social security payments to top up their incomes.
Tax rates being lower for self-employed workers.
The report shows that just a one per cent rise in insecure work – as a proportion of the wider UK workforce – would wipe out nearly £1bn (0.94bn) extra from tax receipts.
The TUC says the blame for the hit to tax revenues “lies squarely with the government” after more than a decade of inaction.
More than 1 million people are currently on zero-hours contracts and 3.6 million people in total are in insecure work, including those in low-paid self-employment.
The TUC has highlighted how over half of those in self-employment earn less than the minimum wage.
And the while the union body supports legitimate self-employment, it says that too many people are pushed into false self-employment by employers who want to cut their tax bill and deny workers basic rights.
Money lost for vital services
The report says that the total being lost to the Treasury from low-paid, precarious working is more than £192 million a week.
The union body says this money could have been spent on vital public services, which have been “cut to the bone” after twelve years of under-funding.
The £10bn annual cost of insecure, low-paid work is the equivalent of nearly two-fifths (38 per cent) of England’s annual adult social care budget.
Today’s report is published as the union body calls on the government to “stick to its word” and deliver its long overdue employment bill at the Queen’s Speech tomorrow.
The employment bill was first promised in December 2019 as the Prime Minister vowed to make Britain the best place in the world to work.
But reports suggest that the government will shelve the legislation, despite ministers repeatedly committing to bringing forward a bill.
The TUC says that without action to tackle precarious work, vulnerable workers and the public finances will continue to suffer.
TUC General Secretary Frances O’Grady said:
“Britain’s insecure work epidemic isn’t just punishing workers - it’s starving the public finances too.
“The government’s failure to clamp down on shady employment practices is costing the Treasury a fortune every year.
“And that means less funding for our cash-strapped hospitals, care homes and schools.”
On the need for the government to bring forward an employment bill, Frances added:
“The time for excuses is over.
“Ministers must stick to their word and deliver the long overdue employment bill.
“Leaving insecure work to flourish unchecked would be an act of betrayal.
“And it would send a green light to bad bosses to carry on cheating their workers and the taxman.”
The TUC is calling on the government to use an employment bill to:
Ban exploitative practices like zero-hours contracts.
Give all workers, including agency workers, zero-hours contract workers and casual workers the same floor of rights currently enjoyed by employees.
Crackdown on bogus self-employment by introducing a statutory presumption that all individuals will qualify for employment rights unless the employer can demonstrate that they are genuinely self-employed.
Penalise employers who mislead staff about their employment status.
- A copy of the report can be found here: https://www.tuc.org.uk/sites/default/files/Fiscalgapreport.pdf.
-The analysis, including the £10bn figure, controls for gender, age, age of youngest child (interacted with gender of the worker), ethnicity, region, qualifications, occupation, industry.
- By insecure or precarious work, we mean: (1) agency, casual, seasonal and other workers, but not those on fixed – term contracts, (2) workers whose primary job is a zero-hours contract, (3) self-employed workers who are paid less than the National Living Wage (£8.91).
- For more on social care expenditure see here: https://www.kingsfund.org.uk/publications/social-care-360/expenditure
The size of the fiscal penalty due to insecure work has been estimated for the TUC by Landman Economics using data from the UK Family Resources Survey and the Landman Economics tax-benefit model.
The Landman Economics analysis uses data from the second quarter of 2016 to the second quarter of 2021 and considers the distribution of the earnings of low-paid self-employed workers (those in the bottom 40% of the earnings distribution) and those on zero-hours contracts.
Rather than just modelling the impact of an increase in self-employment at the average (mean or median) self-employed incomes and ZHC earnings, the methodology used here takes account of the distribution of earnings of the self-employed and ZHC workers. The earnings penalty for low-paid self-employed workers and employees on ZHC contracts is estimated at each point of the distribution, controlling for a range of employee and job characteristics including gender, age, age of youngest child (interacted with gender of the worker), ethnicity, region, qualifications, occupation and industry.
The model estimates considers the extra income tax receipts and National Insurance Contributions that would accrue to the Treasury, and the reduced social security expenditure, if the workers in low-paid self-employment or on ZHCs were instead employees on permanent contracts.
- The Trades Union Congress (TUC) exists to make the working world a better place for everyone. We bring together the 5.5 million working people who make up our 48 member unions. We support unions to grow and thrive, and we stand up for everyone who works for a living.
TUC press office
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