Frank Field MP
Your MP for Birkenhead
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MPs slam ‘freeriding’ gig economy companies

01 May 2017

Companies operating in the “gig economy” and relying on self-employed workers are “freeriding” on the welfare state, according to a parliamentary report.

The Commons work and pensions committee said it had heard of some “appalling practices” in its inquiry into self-employment and the gig economy.

“The apparent freedom companies enjoy to deny workers the rights that come with ‘employee’ or ‘worker’ status fails to protect workers from exploitation and poor working conditions,” the MPs said in the report, published on Monday.

The committee said the numbers of self employed had grown to 5m, or 15 per cent of all UK workers. This trend has been fuelled by the likes of Uber, the taxi-hailing service, and Deliveroo, the food delivery service, whose workforces are largely self-employed.

The work and pensions committee said the companies had propagated a “myth of self-employment” that meant gig employees contributed “far less” to fund the welfare state through national insurance contributions, even though they were benefiting more from it following recent policy reforms.

“Companies in the gig economy are freeriding on the welfare state, avoiding all their responsibilities to profit from this bogus ‘self-employed’ designation while ordinary taxpayers pick up the tab,” said Frank Field, chair of the committee.

“This inquiry has convinced me of the need to offer ‘worker’ status to the drivers who work with those companies as the default option”.

The committee urged the next government to set out measure to equalise NI contributions from the employed and self-employed. Separately, the committee also published evidence on Monday suggesting that benefit claimants had suffered “drastic and abrupt” changes to their income, or were even considering abortions, following the November 2016 introduction of a cut to the benefit cap.

The cap — which limits the total amount of benefit and tax credit income that an out-of-work household can receive, subject to certain exemptions — was reduced from £26,000 to £20,000 a year outside London, and £23,000 within London.

The government had estimated that about 88,000 households would be affected by the new cap, introduced to encourage claimants to look for work. But the committee said evidence showed the lower cap was “beginning to bite” in areas where there had previously been relatively few affected households.

“Welfare advice service Turn2Us told us of worrying trends reported by their helpline over the past year,” said the committee.

“The most worrying trend that is emerging is pregnant women asking the call handler to undertake a benefit check to ascertain what they would be entitled to if they continue with the pregnancy, citing that the outcome will help them to decide whether they continue with the pregnancy or terminate it.”

According to the committee, Newcastle City Council had said its caseload of affected claimants had risen from 72 in March 2016 to 358 in March 2017.

“Highland Council told us that by March 2017, the lower cap was affecting 75 households, as against around a dozen previously,” the MPs added.

The first official statistics to show the impact of the new lower cap are expected to be published this week.

In response the Department for Work and Pensions said those eligible for working tax credit, carers allowance and most disability benefits were exempt from the cap.

“Even with the new cap, households can still receive benefits up to the equivalent salary of £25,000 outside of London and £29,000 in London,” said the DWP.

“Lone parents who work 16 hours a week are also exempt.”

Josephine Cumbo, Financial Times


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