UCATT general secretary reveals extent of bogus self-employment and warns on Olympic problems ahead

Giving evidence to the Business Enterprise and Regulatory Reform select committee today, Alan Ritchie general secretary of construction union UCATT, revealed the huge amount of money being lost to the Exchequer through bogus-self employment.

He also warned that if mistakes already made at the Olympics were not corrected, then it could create “an industrial relations disaster” in the future.

The BERR select committee are midway through a major investigation into the construction industry.

Mr Ritchie revealed that UCATT now estimates that almost 50 per cent of the construction industry (around 1 million workers) were working bogus self-employed. Mr Ritchie said that he believed that bogus self-employment was now costing the Exchequer £5 billion every year, the equivalent of 20 brand new hospitals.

Bogus self-employment occurs when a worker who has all the characteristics of an employee is classified as self-employed for tax purposes. The vast majority of bogus self-employed workers operate under the Construction Industry Tax Scheme. Workers are taxed at source (20 per cent) like a normal employee, pay lower national insurance contributions and are entitled to make an annual tax return.

As the workers are classed as self-employed, employers do not pay any national insurance contributions and the worker pays a lower rate, than a PAYE employer. It is estimated that bogus self-employment costs the Treasury £2.3 billion in lost NI contributions alone.

The remainder of the £5 billion is lost through the ability of CIS members being able to make an annual tax return. The cost of travel, tools tax and other expenses are all offset against tax. Many CIS members can also claim a weekly rate for their spouses or partners, for assistance with taking calls and bookkeeping.

When questioned about the Olympics Mr Ritchie emphasised UCATT’s commitment for the project and gave the Olympic Delivery Authority 6 out of 10 for the negotiations he had been involved in at this stage.

Mr Ritchie said that it was important that the ODA had committed them to undertaking the “ethos” of direct employment on the Olympic project. However this commitment was not as strong as the commitment to direct employment on the highly successful Heathrow terminal 5 projects.

However he warned that the failure of the ODA to agree a common site rate for different professions for the Olympics “was a potential “recipe for an industrial relations disaster”.

At its peak the Olympics will employ in excess of 10,000 workers, working to between 25-45 major contractors and countless sub-contractors. Mr Ritchie said he believed there needed to be a “level playing field” on pay rates. He feared that without these workers being paid less than others for the same work would leave for better paid work on the site, causing instability and delays or alternatively down tools in protest.

During his evidence session Mr Ritchie also raised his concerns about the exploitation of migrant workers and estimated that around 350,000 were employed in the construction sector. He renewed his call for the gangmasters Licensing Act to be extended to the construction industry, in order to end the widespread exploitation of vulnerable, mainly migrant, workers.