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Mr Davey made his remarks when responding on behalf of the Government to David Hamilton’s MP’s Private Members Bill to extend the Gangmasters Act to the construction industry, on Friday 3rd December 2010.
Mr Davey, who supported the extension of the Gangmasters Act to construction before he became a minister, claimed that "licensing" was expensive. UCATT research has found the maximum amount a gangmaster would have to pay for an initial licence would be just over 1% of annual turnover, while for large organisations this cost could be as little as 0.055%. The costs to renew a licence are substantially lower.
Alan Ritchie, General Secretary of UCATT, said: "The claim that licensing is expensive is completely untrue. Reputable agencies and gangmasters will realise that the tiny cost of licensing is a small price to pay to ensure that rogue gangmasters, who undercut rates, are excluded from the sector. That is why reputable trade associations such as the Association of Labour Providers support extending the Gangmasters Act to construction."
Mr Davey also claimed that there was no need to extend the Gangmasters Licensing Authority to construction because the Employment Agency Standards Inspectorate adequately covered the sector. However a Freedom of Information request has revealed that EASI which is responsible for all employment agencies and gangmasters outside of the licensed sector (agriculture, food processing and shellfish collection) managed to achieve just one conviction against unlawful employment agencies in both 2008/9 and 2009/10. Neither of these agencies operated in construction.
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Mr Davey also failed to recognise that EASI is an entirely reactive body, which cannot act until concerns of abuse and exploitation are raised. This is a particular problem in construction where workers are hired to work on sites often for very short periods of time. By the time EASI has even begun to consider an investigation the workers are likely to have moved sites or finished work.
In contrast the GLA is a proactive body, which will not provide a licence to a gangmaster/employment agency until checks have been made with several Government agencies including Her Majesty’s Revenue and Customs, the National Minimum Wage Enforcement Unit and the Health and Safety Executive. If an agency is found to be exploiting workers they can be rapidly stripped of their licence.
One area of growing concern is that employment agencies are increasingly forcing construction workers to register as self-employed in order to evade paying employers’ National Insurance contributions (12.8% of earnings) and to avoid providing workers with even the most basic employment rights such as holiday pay. It is estimated that employment agencies that are forcing workers to be falsely self-employed are costing the Exchequer hundreds of millions of pounds a year in lost revenue.
EASI have made no attempts to combat the growing problem of false self-employment being perpetrated by employment agencies in construction and it is believed that even if they wanted to take action they have insufficient powers to be effective.
Mr Ritchie, added: "It is increasingly clear that employment agencies operating in construction are exploiting workers by forcing them to become falsely self-employed and denying them even the most basic rights. This is costing the Treasury millions in lost revenues at a time when the Government is claiming they want to crackdown on tax avoidance. If they were serious about this policy they would be taking action in the construction industry where the problem is rampant and enforcement is ineffective or non-existent."
Mr Hamilton's Bill is now scheduled to return to the Commons on 28th January 2011.
