Bosses are stealing millions of pounds from thousands of construction workers’ national insurance contributions and taxes.
The subcontracting scams involve some of the largest construction companies.
In one case, 21 people were arrested as part of a criminal investigation into an estimated £6 million fraud last week.
The theft is a result of the subcontracting system that construction bosses use to keep down wages.
A contrived chain of companies is set up that claim to subcontract labour for the construction industry, with the intention of disappearing before paying any taxes or national insurance.
The scam is possible because of the government’s Construction Industry Scheme, which allows contractors to make payments for workers to a subcontractor without accounting for the tax due.
The subcontractor then becomes liable to pay the tax and the VAT element of the money they have received. If the subcontractor contracts out the work to a second subcontractor, and one goes missing, the money is gone.
In another case it has emerged that a gangmaster, Paul Singh, conned workers building the transport links to the Olympics out of thousands of pounds.
Between April 2008 and March this year, workers on the tube’s East London Line extension project were paid as little as a third of the amount a gangmaster was charging for their work, making a profit of more than £300,000.
Guy Pitt, from Transport for London, said, “Singh was getting £155 per man per day while paying them around the minimum wage, which allowed him to make around £6,000 per week for himself.”
Construction workers do not have even the limited protection of the Gangmasters Licensing Authority.
Paul Singh was contracted to provide the staff by Woulfe and Son, a firm subcontracted by Balfour Beatty/Carillion, the consortium that won the £363 million contract to build the first phase of the project.
Workers on the site told the Observer newspaper that Singh’s staff were paid as little as £50 per day, which would take their wages below the national minimum wage.