Emily Kenway, The Guardian.
While Labour is desperately trying to mimic Reform’s line on the cash economy, the blame lies solidly with ordinary people feeling the pinch.
According to politicians across all parties, something called the “hidden economy” – the shadowy nethers of the labour market, in which work goes unregulated and undeclared to the authorities – is a “menace”, full of migrants whose illegal working “undercuts British workers”, and even a threat to our national security. MPs have been so worried about asylum seekers delivering their Friday night pizza that they’ve spent parliamentary time discussing Deliveroo et al’s business models. In response, the government has repeatedly reassured us, in the somewhat Mills & Boon-style phrasing of Yvette Cooper, when she was home secretary, that it’s “surging enforcement” to tackle the problem.
Solutions suggested include Keir Starmer’s digital ID cards, requirements for increased “right to work” checks, and new data-sharing agreements in which the Home Office gives delivery companies the addresses of asylum hotels to try to stop asylum seekers working. All of these measures are intended to stop migrants earning money if they lack the legal right to work, which suggests that the government thinks those migrants are the main problem in the hidden economy.
But the government’s own commissioned research on the issue suggests something very different. Reports in 2011, 2017 and 2023 laid out the facts of the UK’s hidden economy, meaning work that is in legal sectors but that people are failing to register for regulatory or tax purposes (rather than illicit activities, such as drug-dealing and sex work, which are wholly or partly criminalised). According to the most recent estimate, about 8.8% of our adult population is working under the table; that’s approximately 4.4 million people. There are 700,000 to 900,000 undocumented migrants in the UK with no right to work and a further 224,000 asylum seekers awaiting a decision, many of whom will also be barred from earning. Even if all of those migrants were working illegally, they would comprise a small minority of hidden economy activity. Moreover, the research finds no statistically significant difference in proportions of workers across urban versus rural areas, nor different geographical regions, despite substantial differences in migrant populations. Conclusion? The hidden economy is not a migrant problem.
Instead, it’s a problem of the economy. Of making ends meet. Of getting by. Of paying our rising bloody bills. Because the majority of people working off the books live in the most deprived areas of the UK. They are also most likely to be young (aged 18 to 24), with participation declining with age, and earning very little from it, with 50% of activities generating below £250 each time. And they are mostly “moonlighters”, meaning that their hidden work supplements other officially declared earnings; it’s top-up income in a high-cost economy.
Take Dennis, now a fully qualified electrician. He used to work cash-in-hand while he trained, because his earnings were so low. “By the time I was finished [paying living costs such as food and rent], I was left with nothing,” he says. “We used to do a bit of cash-in-hand, which helped me get by.” For reference, the current national apprenticeship wage is £7.55 per hour, far below the minimum wage. His story is one of several featured in research led by Danny Buckley of Loughborough Business School. They found that undeclared work was simply normal for people in the early years of careers such as car mechanic, hairdresser, plumber, painter and decorator, tree surgeon, heating engineer and, like Dennis, electrician.
That’s the workers, but there are also the customers to consider, and that’s where me and you come in. The same research identified customers as a driving force behind the hidden economy. Ethan, a heating engineer, told the researchers that “you do feel pressure from customers, which drives all prices down […] The only way I can keep cutting costs would be to either use cheaper materials, not pay everything or employ people off the record.” Andrew and Carl, both mechanics running garages, described customers asking to “lose the VAT”. It does feel rather obvious when you start seeing the hidden economy in this way, doesn’t it? Who hasn’t wished that the quote from a builder or car mechanic was lower? And if it is low, who’s checking why, instead of feeling relief that things just got a little easier?
This rather mundane picture, of an economy constituted by ordinary people trying to increase earnings or lower bills, is far removed from politicians’ misleading portrayals. Instead of upstanding apprentices and harried families, we’ve heard repeated concerns about a highly specific business type: migrant-run high street shops and services. Or, as our democratic representatives put it, “bogus barber shops” and “fake vape shops”.
Now, I’m not suggesting that all those businesses are always legitimate. But the National Centre for Social Research found that “activities that are more likely to be in the hidden economy are not necessarily the most common activities in the hidden economy”. In plain terms, there are some businesses in which flouting the law is extremely common. But they do not form the largest part of the hidden economy, which is actually taking place across a much wider range of sectors. General household maintenance was the service most likely to be purchased from the hidden economy.
Yet highlighting these particular businesses is such a hot trend in Westminster that you’d think a kind of anti-PR firm was doing a promotional push. And of course, it is. It’s Reform UK. But Labour is desperately trying to keep its voter share by mimicking Reform’s style and its penchant for ill-informed policies. Eighteen months ago, Reform’s deputy leader, Richard Tice, made headlines with his assertion about the dodginess of “Turkish barbers”. A year later, the Labour/Co-operative MP Paul Waugh stated in parliament that “honest businesses are being undermined by the menace of illegal working, particularly by illegal migrants from Iran and Iraq in bogus barber shops and fake vape shops”
If you buy what they’re selling, thinking that the hidden economy is populated by migrants working illegally, then you might back ID cards and the other aforementioned measures. You might be glad to see the home secretary’s recent press release crowing about the “largest crackdown on illegal workers since records began”. But as we’ve seen, work that flouts the law is barely about undocumented migrants at all. Policies that pretend otherwise have more in common with the snake oil sold on social media than a better British economy.
