Insecure, low-paid work could be costing the Government billions - Greg Wright

“It’s the economy, stupid”, a phrase which defined the US presidential contest in 1992, is likely to loom large in the next General Election.

I’ve never felt so gloomy about our economic prospects. The poor and marginalised will undoubtedly suffer the most as inflation soars and demand for food banks hits record levels.

Last week, the Bank of England raised interest rates to 1% as it warned the economy will go into reverse and inflation will peak at more than 10% as the Ukraine war compounds a crippling cost-of-living crisis.

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It is these deep-rooted economic troubles - as opposed to the ongoing controversy surrounding the actions of major political figures during lockdown - which will have the biggest influence on voter behaviour when they choose the next Government.

Last week, the Bank of England raised interest rates to 1% as it warned the economy will go into reverse and inflation will peak at more than 10% as the Ukraine war compounds a crippling cost-of-living crisis.Last week, the Bank of England raised interest rates to 1% as it warned the economy will go into reverse and inflation will peak at more than 10% as the Ukraine war compounds a crippling cost-of-living crisis.
Last week, the Bank of England raised interest rates to 1% as it warned the economy will go into reverse and inflation will peak at more than 10% as the Ukraine war compounds a crippling cost-of-living crisis.

The Bank’s deputy governor Ben Broadbent said the UK economy is facing a shock on a bigger scale than that seen in the 1970s oil and energy crisis, although he predicted it is not set to last as long.

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The small rate rises that can bring mortgage payment pain - Sarah Coles

At the same time, the nature of work is changing, and not necessarily in a way that supports our public finances. Unions have warned that insecure, low-paid work is costing the Government billions of pounds in lost revenue.

The TUC said its study suggested that low paid self-employment, zero-hours contracts and other forms of precarious work were “starving” the public purse by reducing the tax take and increasing social security payouts.

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Low paid self-employment is costing the exchequer £9.7 billion alone each year, with zero-hours contracts costing a further £614 million, according to the TUC.

The “eye-watering” cost to the Treasury is the result of low-paid self-employed workers and those on zero-hours contracts earning significantly less than regular employees.

As a result, they are paying less tax and national insurance and are more reliant on social security payments to top up their incomes, according to the TUC’s analysis.

General secretary Frances O’Grady said: “Britain’s insecure work epidemic isn’t just punishing workers, it’s starving the public finances too.

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“The Government’s failure to clamp down on shady employment practices is costing the Treasury a fortune every year. That means less funding for our cash-strapped hospitals, care homes and schools.”

The TUC repeated its calls for the Government to deliver the “long overdue” Employment Bill in the Queen’s Speech. There is speculation that the measure will not be included in the list of planned legislation.

A Government spokesperson said: “We are committed to building a high skilled, high productivity, high wage economy that delivers on our ambition to make the UK the best place in the world to work.

“This includes ensuring workers’ rights are robustly protected while also fostering a dynamic and flexible labour market.”

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Downing Street has said the Government is keeping “all options open” when it comes to addressing the cost-of-living crisis.

When faced with squeezed budgets, many people will simply borrow more money, which may do them no good in the longer term.

Nearly one in 10 (9%) people have used buy now pay later (BNPL) schemes to cover essentials, according to the research for Hargreaves Lansdown. BNPL schemes can help people to avoid having to pay interest on their borrowing, while still being able to spread paying the money back over a period of time.

Sadly, this pattern of behaviour could also lead to people taking on debt which they will struggle to repay.

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Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “Borrowing to pay for essentials feels like a solution in the short term, but, by spreading the cost, it means pushing up your expenses for months, making it even harder to keep on top of your finances.”

The sound and fury surrounding Partygate and Beergate should not drown out the siren cries from an economy in deep distress, and the stories of human misery that accompany them.