Low-paying firms cost taxpayer £11 billion a year in top-ups

The British taxpayer is subsidising badly-paying employers to the tune of £11 billion a year.

According to calculations by the Citizens UK charity, more than five million workers need their pay topped up by tax credits and other benefits in order to enjoy a basic standard of living.

In many cases, workers are receiving top-ups that amount to more than their employer pays in tax.

Introducing a minimum living wage of £7.85 an hour (£9.15 in London) would, says Citizens UK, reduce the country's benefits bill by over £6 billion. This is more than half the £12 billion the government says needs to be cut from the welfare bill.

"The research we've carried out demonstrates just how skewed the system is. Whilst we agree that the major retailers provide employment opportunities, many of these roles are at pay rates so low that workers still have to rely on benefits to get by," says Reverend Paul Regan, chair of Citizens UK.

"These businesses post profits and pay tax, but the reality shows Treasury has to step-in and often pays out more than it gets in to help those workers for whom work does not pay."

Some of the worst offenders are the major supermarkets. Tesco employees, for example, have needed their wages topped up by £364 million in the last year. Paying the living wage, says Citizens UK, would cut this bill by £92 million.

Together, Tesco, Asda and Sainsbury's cost the taxpayer well over £700 million.

Meanwhile, around 32,000 Next employees need their pay topped up by an average of £2,087 a year. The company's chief executive, Lord Wolfson recently claimed that the £6.70 his staff are paid is enough to live on.

"For very many people, the retail sector provides useful income and Next has 30 applications for every vacancy. Raising wages too fast will simply reduce employment opportunities," he said.

The living wage has the support of all the main political parties - but none believes that it's feasible to make it mandatory any time soon. Currently, more than one in five employees nationwide earns less than the living wage.

And this can present problems for more generous employers, such as Salut Wines, an accredited Living Wage employer.

"We are building our business on these principles but it's frustrating that we are surrounded by big companies who aren't doing the same. We're in competition with the big name retailers who are paying incredibly low wages that everyone else has to help subsidise through the benefits bill," says director Sara Saunby.

"As a taxpayer and a business owner, it doesn't seem like a sustainable situation. In the current climate everyone, including big business, has got to do their bit to support a recovery for everyone."


Company No. low paid staff Annual public subsidies Lvg. wage saving Pre-tax profit

Tesco 209,000 £364,304,000 £92,917,000 £2,191,000,000
Asda 120,000 £221,337,000 £70,132,000 £913,800,000
Sainsbury's 107,000 £181,572,000 £40,524,000 £898,000,000
Morrison's 83,000 £189,525,000 £97,195,000 -176,000,000
Next 32,000 £67,364,000 £41,154,000 £695,000,000

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