Written by: Keith Tully
Reviewed: Wednesday 15th February, 2017
The growth of what has become known as the gig economy is costing HMRC in the region of £75 million in lost tax revenues every week, it has been claimed.
According to a report published by the Trades Union Congress (TUC), an “explosion” of low paid and insecure employment around the UK in recent years has led to a significant decrease in amounts of money being paid as taxes.
The TUC is also convinced that a shift away from full-time, permanent employment within large parts of the economy is leading more people to earn less and therefore rely increasingly on in-work benefits such as tax credits and housing benefits.
Overall, the growing prevalence of working patterns involving zero-hours contracts and self-employment through companies such as Uber and Deliveroo, is estimated by the TUC to be costing the Treasury roughly £6 billion a year.
Around one in 10 workers nationwide are now in some form of insecure work, with the numbers involved having risen by roughly a quarter over the past five years, according to official statistics.
Most people who are employed on zero-hours contracts or are self-employed earn less than they would in full-time employment but even if they earn more by comparison the nature of the tax system means that they will typically still pay less to HMRC, the congress’ report suggests.
“The huge rise in insecure work isn’t just bad for workers. It’s punching a massive hole in the public finances too,” said Frances O’Grady, the TUC’s general secretary.
“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.”
The legal designation of people who perform functions on behalf of or via businesses such as Uber and Deliveroo has become an issue of contention in the UK in recent months.
An employment tribunal that took place in London in October 2016 ruled that Uber should not consider its drivers to be self-employed and that they are entitled to be paid the National Minimum Wage and sick pay by their employer.
Uber has upwards of 40,000 drivers working across the UK and has been a major contributor to the growth of the gig economy.