Yesterday Shadow Chancellor Ed Balls announced that Labour is launching a review of bogus self-employment in the construction industry.
It was in a speech to the TUC Congress in Brighton that Mr Balls said “On the issue of bogus self-employment in the construction sector and more widely, I am determined that we look at this issue again. There is a careful balance to be struck. I do not want in any way to undermine genuine self-employment. But nor should contractual arrangements be distorted and misrepresented to avoid tax and undermine terms and conditions.
“So I have asked the shadow chief secretary, Rachel Reeves, to look again at the Treasury's 2009 proposals for reform - abandoned by this government - and to consult employers, UCATT and the wider TUC to see if there is a better and fairer way forward”, adding that “Construction is one of the most important industries. Let’s work together to make it stronger, safer and fairer for the future.”
Balls said that he will condemn building firms that encourage their employees to sign bogus contracts, indicating that they are self-employed for the purpose of denying them rights like sick pay, paid holiday and pension contributions, and to avoid making full tax contributions. Labour want to tackle this issue in a drive to protect workers’ rights and boost tax and National Insurance contributions.
“I do not want in any way to undermine genuine self-employment” Balls confirmed, “But nor should contractual arrangements be distorted and misrepresented to avoid tax and undermine terms and conditions. It’s not fair to taxpayers and it’s not fair to your members either.”
It’s thought that fake self-employment is a problem for the construction industry in particular, due to the short-term nature of many construction employment projects, and the fact that construction companies will regularly change location. According to Treasury data, there are 300, 000 people bogusly self-employed in the construction sector, costing the taxpayer around £350 million.
Balls made the announcement as he warned that George Osborne has caused an economic “lost decade”, warning that a decade of slow growth and high employment will do long-term damage to the economy.
The general secretary of the Union of Construction, Allied Trades and Technicians (Ucatt) Steve Murphy welcomed the initiative, saying that the opposition party were listening to ordinary workers and trade unions, and acknowledging that “bogus self-employment is not simply about a loss of revenue to the Treasury but it also strips workers of even the most basic employment rights.”
In 2009 the old Labour government proposed introducing “deeming” to the construction sector for tax purposes, with workers being deemed employees unless they met specific criteria, but the proposal was soon dropped by the Conservative-Liberal Democrat coalition government.
Ucatt has called for the scrapping of the Construction Industry Scheme, which it considers to be the root of the problem, as self-employed workers in construction are taxed but do not pay any natural insurance contributions; helping them to make a 13.8% saving.
Photo courtesy of Harry Potts.