Taxpayers are having to find £11billion a year to top up the wages of millions of people working in supermarkets and other low paid jobs. The money, which amounts to a massive public subsidy for the companies involved, is paid to some 5.2million workers in the form of tax credits and other benefits. Campaigners say the figures shine a light on how companies making huge profits are relying on the taxpayer to ensure their staff have enough money to put food on the table. The total amount of benefits paid to staff at some companies exceeds what the firms pay in corporation tax, according to the study by Citizens UK. Critics have accused supermarkets of relying on benefits to ensure their staff earn enough to put food on the table without them having to raise wages . The charity is campaigning for the adoption of the Living Wage - £9.15 an hour in London and £7.85 for the rest of the UK - across both the public and private sector. It estimates this would reduce the need for in-work benefits by £6.7bn a year, which would make a massive dent in the £12billion reduction in welfare spending which the Conservatives say is necessary. The current minimum wage for those over 21 is £6.50 an hour and will rise to £6.70 in October, but this is well below what the Government accepts is needed by many people, particularly those with children, to make ends meet. The charity’s report complains: ‘The public subsidy enables profitable businesses to get away with paying low wages.’ Its report says Tesco, Asda and Sainsbury’s posted combined profits of £3.9bn last year, but between them cost the taxpayer more than £750m in benefits paid to their staff. Tesco paid £519m in tax but received £364m in public subsidy for its 209,000 low-paid workers. Asda spent £150m in tax but its 120,000 low-paid workers received £221m in benefits. Morrisons’ tax bill was £62m while its 83,000 low-paid workers received £190m in benefits and Sainsbury’s paid £180m in tax, almost exactly as much as its low-paid staff received from the public purse. Of all the profitable companies examined by the charity, Next had the highest average subsidy of £2,087 per head given its high proportion of young employees who are typically paid just above the minimum wage of £6.70 an hour. Next is run by the Conservative peer, Lord Wolfson, who came under fire last month for criticising the whole idea of a Living Wage as an ‘invention’ Next is run by the Conservative peer, Lord Wolfson, who came under fire last month for criticising the whole idea of a Living Wage as an ‘invention’. He argued that pushing up wages will block recruitment. ‘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. Other firms who rely on the taxpayer to top up staff wages include Amazon, fast food outlets and local authorities, where cleaning and care workers, for example, are already paid by the taxpayer. Paul Regan, chairman of Citizens UK, said: ‘The major retailers post profits and pay tax, but the Treasury has to step in and often pays out more than it gets in to help those workers for whom work does not pay.’ He called on the next government to show leadership ‘by implementing the living wage into all public sector commissioning’. 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.’ All of the main political parties support the living wage. Last week, David Cameron said businesses that can afford to pay it ‘should consider doing so’. Boris Johnson, the London mayor, said it was ‘madness’ that large employers paid chief executives huge salaries while their lowest-paid workers were subsidised by the taxpayer. Labour has made demands for employers to pay the Living Wage a major plank of its election strategy. However, the former Labour Cabinet minister Alan Milburn, chairman of the Social Mobility and Child Poverty Commission, said it could take 10 years to make the living wage a reality. He said: ‘Employers will have to pay more but wages cannot rise without improved productivity and more skills training. We will need a 10-year transition period to become a living wage country.’ Charles Cotton, of the Chartered Institute of Personnel and Development, warned wage rises will hit employment, saying: ‘If employees weren’t getting subsidies, would firms employ as many people or would they cut back?’ Supermarkets said they paid above the minimum wage of £6.50 an hour for those aged over 21, regularly reviewed pay and gave employees benefits such as staff discounts. Asda, which is part of the US retail goliath Walmart, said pay and benefits ‘should be considered in the round’. In the USA, it is estimated that Walmart’s low-wage workers cost U.S. taxpayers an estimated $6.2 billion (£4.2bn) in public assistance including food stamps, Medicaid and subsidised housing. Morrisons said discounts and profit-sharing took the pay of many over the living wage. Sainsbury’s said it offered employees a discount card, annual bonus and paid breaks. Tesco said it paid, on average, 4-7per cent more than major competitors and had contributed £1.5bn in tax through business rates, employer national insurance and corporation tax in 2014. The British Retail Consortium said pay and benefits packages equated to an average of about £8.40 an hour and the industry had paid £19.5bn in ‘core business taxes’ last year. Asda, which is part of the US retail goliath Walmart, said pay and benefits ‘should be considered in the round’
Campaigners claim benefits paid to staff are higher than corporation taxes.
Critics say handouts allows companies to get away with paying low wages.
Citizens UK is calling for London living wage to be spread to rest of Britain.
It claims rolling out £9.15 an hour wage would reduce benefits by £6billion.