Gig-economy costs the Government £4 billion a year

Zero-hours contracts and low-paid self-employment costs the Exchequer an estimated £4 billion a year, according to a new TUC report published today.

The report: The impact of increased self-employment and insecure work on the public finances, 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 huge rise in insecure work isn’t just bad for workers. It’s punching a massive hole in the public finances too,” says TUC general secretary Frances O’Grady.

“Zero-hours contracts and low-paid self-employment cost 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,” she says.

The TUC report 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.

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. They are also more likely, according to the report, to need 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, which has led to a lower tax take and higher spending on in-work benefits.

The TUC also warns the problem could get worse in the future.

It estimates that 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. And that the number of self-employed workers who are low-paid has increased by more than a fifth (21%) over the past decade.

The report has been published on the same day as the Government’s ‘gig-economy panel’ kicks off its fact-finding tour of Britain.

Today, the expert panel, which is led by Matthew Taylor, chief executive of the RSA and includes Diane Nicol, partner and employment lawyer at Pinsent Masons, is at the Google campus in London. The review panel will also visit Belfast, Cardiff, Nottingham, Maidstone and Glasgow, as it examines modern working practices.

Promising an open, ambitious review, Taylor has spoken about the need to generate a healthy public debate and how he hopes to get a sense of whether the ideas generated are going to be largely supported or meet strong resistance.

“This isn’t just about Government,” says Taylor. “If we want work – whether ‘modern’ or traditional – to be fair and decent with scope for progression and fulfilment then we all have a role, as consumers and citizens as well as employers and workers.”

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