Joe Storey is an A-Level student who is researching Margaret Thatcher’s influence on the current Conservative party’s economic policies.
Last week Ed Miliband released his latest soundbite, the ‘zero-zero’ economy, proclaiming that those at the top paid zero tax whilst those at the bottom were exploited on zero hours contracts.
As Fraser Nelson has pointed out, this is a remarkable factoid. In the UK, the top 0.01 per cent of earners contribute 4.2 per cent of all income tax, a larger amount than the income tax paid by the bottom 9 million. The top 1 per cent of earners more than pay their fair share, providing almost 30 per cent of income tax revenue compared with 21 per cent in 2000. Incidentally, this figure increased substantially after the top rate of tax was cut from 50p to 45p (a reform which Labour seek to reverse upon their election).
Miliband was correct on one point – the emergence of a zero-tax economy in the UK in the form of the coalition removing 3 million individuals from income tax altogether. Furthermore, the poorest half of society is contributing less and less to the Treasury’s coffers. In 1999, the Treasury derived 12 per cent of income tax revenue from the bottom 50 per cent; as of last year, this figure had reduced to 10 per cent.
On zero hours contracts, Labour’s hypocrisy is breathtaking. Miliband’s wrath was directed at retailer Sportsdirect, which he berated for “Victorian practices”. Despite the supposed “Victorian” nature, this has not prevented 62 Labour MPs from hiring employees on these contracts, nor has it deterred six Labour councils in London alone from using the contracts. As ConservativeHome reported last year, Ed Miliband’s local Doncaster Metropolitan Council employed a colossal 2,759 employees on zero hour contracts out of a total of approximately 11,200 staff. That’s close to 25 per cent of total staff on these contracts.
In London, Brent council employs 18 per cent of its staff with no guarantees of work, while Merton council utilises the controversial contract for 14 per cent of its employees. The problem appears to be insidious within Labour councils: Newham council employs 546 people on the contracts. As noted by Harry Phibbs, the hypocrisy goes wider. Andy Sawford, Labour MP for Corby and East Northamptonshire, has advocated outlawing zero hours contracts. His local Corby council employs 151 members of staff on just such arrangements.
Last year’s consultation on zero hours contracts highlights Labour’s impotence. The consultation indicates that in Q4 2012, the proportion of the workforce on these contracts was 0.8 per cent, the same percentage as in Q4 2000. Furthermore, Labour allowed the use of these contracts to balloon from 2004 onwards (subsequently catalysed by the economic crisis). On Labour’s watch, the median usual weekly hours worked by individuals on zero hours contracts fell significantly from 32 hours to 21 hours per week.
Given even Labour MPs are making use of these contracts, it suggests they must have some merit despite the furore. A survey of employees by the Chartered Institute of Personnel and Development indicates the pandemonium surrounding the contracts is not warranted: it revealed that workers on zero hours contracts were as satisfied with their job as contracted employees. Moreover, 47 per cent of those employed with no contracted hours were satisfied, compared with 27 per cent who were dissatisfied. It is also disingenuous to suggest only the employer accrues benefit in this type of relationship: employees can benefit from flexibility, choice and greater opportunities to join the workforce (had it not been for these types of contracts, unemployment would have regrettably been higher).
There is no denying that not all of society has borne the fruits of our economic recovery. In fact, far from it. Low interest rates have benefited the fiscally imprudent at the expense of sagacious savers. The real salaries of the wealthy have grown while they contract for the average worker. HMRC punishes taxpayers whilst Amazon et al. avoid their tax bills. For these people, more government is not the answer. Cutting taxes, minimising regulation to allow businesses to flourish and grappling with our spiralling national debt will benefit society. More regulation, higher taxes and bigger government are most harmful for those struggling at the bottom.
Zero hours contracts are not perfect – but the Conservatives should reject populist calls to outlaw them and should seek to reform exclusivity clauses and marginalise bad employer practice instead.