The growth in zero-hours contracts and low-paid self-employment is costing the UK economy billions of pounds a year in lost tax revenue and national insurance contributions, a new report from the Trade Union Congress (TUC) warns today (Tuesday).
TUC says the surge in zero-hours contracts, and the growing practice of employers dumping workers onto low-paid self-employment, is leading to a tax and national insurance shortfall of around £4 billion a year, and is also resulting in higher in-work benefit payments.
This is equivalent to more than £75m a week, or a quarter of England’s social care budget.
According to the report, low-paid self-employment accounts for just over half (£2.1bn) of this lost revenue for the Exchequer, while increasing number of workers stuck on zero-hours has left an additional £1.9bn hole in the public finances.
TUC used tax and benefit modelling to show the impact of the growth in insecure work since 2006, which revealed how insecure work has led to a fall in government revenues because workers earned far less than those on fairer employment contracts.
This, in-turn, causes workers to become increasingly reliant on in-work benefits, such as tax credits and housing benefit, to top-up their low income.
And the TUC warns the problem is set to become even worse, with the number of self-employed workers who are low-paid increasing by 21% over the past decade.
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.”