Equal terms for outsourced workers: calculation note

Central fiscal result

+£4.5bn - Net public-finance impact in 2027-28

Low case: +£1.0bn. High case: +£15.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Require outsourced, agency and directly employed comparable workers to receive equal core terms.
• Baseline is current law and published official data unless stated.
• Private business costs are excluded unless they affect tax or procurement.
• Target year is 2027-28, with later years shown separately.

Affected population

• Unit is outsourced and agency worker jobs.
• Central affected count is 1.5m worker jobs.
• Public procurement exposure uses WGA purchases.
• Private-sector employer costs are not fiscal unless taxed.

Gross impact

• WGA purchases of goods and services were £263.7bn in 2023-24.
• Central public-contract labour-cost uplift is £5.0bn.
• Private direct business costs are excluded from fiscal score.
• Tax and NI offsets reduce net cost by £1.0bn.

Fiscal build-up, central case

• Public procurement pass-through: +£5.00bn
• Administration and disputes: +£0.25bn
• Tax and NI receipts: -£1.00bn
• Benefit savings: -£0.20bn
• Provider failure reserve: +£0.45bn

Central net impact: +£4.5bn in 2027-28.

Behaviour and pass-through

• Low case assumes narrow public-sector comparators.
• Central assumes labour-intensive public contracts reprice.
• High case assumes broad private and public coverage.
• Some outsourcing shifts back in-house.
• Service volumes fall if budgets are fixed.

Phasing

• 2026-27: +£0.4bn. Contract audit.
• 2027-28: +£4.5bn. First contract reset.
• 2028-29: +£6.0bn. More contracts renew.
• 2029-30: +£7.0bn. Wider pass-through.

Main source groups

• HM Treasury, "Whole of Government Accounts 2023-24" (2025): Whole of Government Accounts report £240.5bn staff costs and £263.7bn purchases in 2023-24; anchors paybill and procurement exposure.
• Department for Business and Trade, "Employment Rights Act 2025 - Economic Analysis" (2026): The ERA economic analysis estimates around £1bn annual direct business cost before social-care bargaining; provides official baseline costs and affected groups.
• HMRC, "Rates and thresholds for employers 2026 to 2027" (2026): HMRC thresholds define income tax, employee NI, employer NI and statutory-pay recovery; used for tax and statutory-payment offsets.
• DiNardo, Fortin and Lemieux, "Labor Market Institutions and the Distribution of Wages, 1973-1992" (Econometrica, 1996): Labour-market institutions can compress wage inequality through wage floors and bargaining power; useful for distributional channels, not for claiming free fiscal gains.
• Autor, Kerr and Kugler, "Does Employment Protection Reduce Productivity?" (Economic Journal, 2007): Employment-protection changes can reduce productivity where firms face higher firing and adjustment costs; supports caution on policies that raise dismissal, scheduling or adjustment costs.
• Green Party of England and Wales, "Workers' Charter 2026" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.