Gig economy costs taxpayers £4bn a year in lost revenue, says TUC

14 Feb 17

The rise in zero-hour contracts and poorly paid self-employment costs the Treasury £4bn annually in lost tax revenue and in-work benefit payments, the Trades Union Congress has said.

In an analysis released today, the TUC has modelled the impact of the growth in insecure employment – work without the benefits of guaranteed hours or basic employment rights – since 2006.

It found that those in precarious work earn substantially less than regular employees. Not only do they pay less tax and national insurance but also they are more likely to rely on in-work benefits to top up their earnings.

The report said this was costing the government around £4bn annually, or around £75m a week. Half of this (£2.1bn) was due to the growth of low-earning, self-employed workers leader to a lower tax take, while the TUC said  zero-hours contracts contribute £1.9bn to the shortfall.

The report warned that the situation may worsen, highlighting that insecure working has grown by more than a quarter over the past five years and now accounts for one in 10 UK workers – just over three million people. Moreover, the number of low-paid, self-employed workers has risen by one fifth (21%) over the past decade.

Frances O’Grady, general secretary of the TUC, said: “The huge rise in insecure work isn’t just bad for workers. It’s punching a massive hole in the public finances too.”

She added that the revenue lost “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.”

In response to the report, a government spokesperson said: “The government is committed to creating an economy that works for everyone and this is why Matthew Taylor [chief executive of the Royal Society for the Encouragement of Arts, Manufactures and Commerce] is leading an independent review into whether employment practices need to change in order to keep pace with modern business models.”

“We recognise that the tax system also needs to adapt, and the government is considering ways to ensure it remains fair, simple and effective for everyone.”

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