Taxpayers Subsidise Big Business by an Estimated £11 billion a Year
**Please note all figures used in this report are from 2015 and hence should be seen as a snapshot from that time and not indicative of current pay practices or public subsidies. To date only one major supermarket chain, Aldi, is paying the real Living Wage to in-house staff. However Aldi does not pay the real Living Wage to contract staff. No other major supermarket chains pay the real or London Living Wage rates, calculated as the minimum needed to meet the cost of living in the UK and London.**
The UK’s low pay culture is costing tax payers £11 billion per year according to research released by community organising charity, Citizens UK, today.
With over 5.24 million people in the UK, 22% of all employees, earning less than the Living Wage, the Treasury is forced to step in and top-up incomes with in-work benefits, such as working tax credits, so that workers can afford a basic standard of living despite being in employment.
The research shows that in the case of some of the UK’s largest retailers, businesses are benefiting more from the Treasury in wage top-ups than they are paying in tax.
Tesco’s low pay culture is supplemented by the Treasury who had to top up their pay rates to the sum of £364 million in the last year, whilst pay for each low waged worker each year at the retail giant Next costs the taxpayer approximately £2,087.
Huge savings could be made to the public purse if companies paid a Living Wage to employees. If Tesco alone made the move tax payers could save £92 million a year.
Number of Low Paid Employees (to nearest 000)
Total Public Subsidies Per Year (to nearest 000)
Living Wage Saving Per Year (to nearest 000)
Pre-Tax Profit in latest year
Tax in latest year
UK-wide figure (£6.70)
The Rev Karen Rooms, Area Dean for Nottingham South and member of the Citizens UK Council said: “The figures revealed by this research are shocking, as the true scale of the subsidy of big business becomes clear.
“The huge profits made by some of these high street names are made off the back of poverty-wages. In some instances the amount of tax they pay doesn’t even cover the wage top-ups we all have to chip-in and help with through the Treasury.
“At a time of austerity when all sectors of society have to make savings it seems obscene that big business isn’t playing its part to help the country recover.”
The research sheds substantial light on the retail sector as ‘sales & retail assistants’ make up the largest group of people working on less than the Living Wage across the UK economy at 760,000 people. Despite posting profits of £3.8 billion between them, Tesco, Asda and Sainsbury’s combined, cost the UK taxpayer well over £700 million as the public purse subsidised the wages paid to their staff. If the top three retailers all paid the Living Wage, the Treasury would save over £200 million.
Reverend Paul Regan, Chair of Citizens UK said: “Citizens UK champions the Living Wage as one way responsible employers can help tackle the shocking situation we find ourselves in today, where half of those in poverty live in a household where someone has a job.
“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. 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.
“We’re calling on employers to pay the Living Wage as a step towards rebalancing the system and lessen the burden on the taxpayer.”
The combined figure of well over £200 million in savings made by the Treasury should all four major retailers (Asda, Morrison’s, Sainsbury’s and Tesco) adopt the Living Wage could pay for 30 new schools; or over 800,000 ambulance call-outs.
Reverend Karen Rooms, Citizens UK continued: “We have used conservative estimates when making our calculations and looked at pay rates for those aged over 21.
“I’m sure there will be discussion and debate around the sums. But I’m clear, this isn’t about pointing the finger of blame at a particular retailer, it’s about raising awareness amongst the public that low pay impacts us all. Our members have placed the Living Wage at the heart of their Citizens UK Manifesto 2015 as one positive step business, where possible, can take and all political parties can encourage.”
“Citizens UK champions the current 1,300 accredited Living Wage employers, many of whom are smaller, independent companies that see both the moral and business sense in paying their workforce a rate of pay that means they can at least afford the basics through their own hard work. We call upon more employers to follow their leadership.”
Sara Saunby, director, Salut Wines, an accredited Living Wage employer, said: “We are an independent retailer selling and serving wine in the heart of Manchester. We are a new business, and from the beginning we agreed that our business is only viable if we can afford to pay our staff at least the Living Wage. For us investing in a quality team is essential; why should we expect the tax payer to make up a shortfall in wages through in-work benefits?
“We believe retail and hospitality is all about people and quality service. We’ve invested in training and have kept the same team since launch. Customers comment on how great their experience is, and tell us how unusual it is for them to be served by knowledgeable, friendly staff, and the customers keep coming back.
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. 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.”
The methodology paper explaining the research calculations can be downloaded here .Sign the Citizens UK Taxpayers' Letter to the CEOs of Asda, Tesco, Morrison's, Sainsbury's and Next.