The rapid rise in insecure work in the UK is costing the government almost £4bn a year in lost tax income and benefit payouts, according to new research into the gig economy by the Trades Union Congress.

The UK’s growing legions of 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. Their relatively low earnings also make them more likely to need to rely on in-work benefits such as tax credits and housing benefit, the TUC said.

Taking those factors together translated to a loss to the exchequer of more than £75m a week – equivalent to 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,” said TUC general secretary Frances O’Grady.



“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 analysis, conducted for the TUC by consultancy Landman Economics, used tax and benefit modelling to gauge the impact of the rise in insecure work since 2006.

Official figures show the number of self-employed people in the UK has grown 26% over the last decade to 4.8 million at the last count, or 15% of all people in work. The TUC believes the number of self-employed workers who are low-paid has increased by 21% over the past decade. It classes the bottom 40% of earners within the self-employed as low-paid.



Labour market experts attribute some of the rise in self-employment to technological changes that make it easier to start a business and work flexibly. But they also estimate a significant proportion is driven by people feeling they have no choice but to turn to self-employment as more secure work becomes harder to find.



The TUC estimates one in 10 workers are now in precarious work and it warns the cost to the public finances from changing employment practices could rise further.

O’Grady said the onus was on firms using zero-hours contracts and bogus forms of self-employment, where workers should really be classified as employed, meaning they qualify for all the accompanying protections such as holiday pay and the national living wage.

“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,” she said.

“Getting more people into unions is key. Employees in unionised workplaces are twice as likely to be on better-paid, secure contracts.”

The TUC’s estimates chime with warnings made by Matthew Taylor, Theresa May’s adviser on the future of work, on the cost to the public purse from the gig economy.

Taylor, appointed by the prime minister to review modern employment practices, said last year that self-employed workers and contractors were paying more than £2,000 less a year on average in tax than employees doing equivalent jobs.

A government spokesperson said: “The government is committed to creating an economy that works for everyone and that is why Matthew Taylor 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.”

