After a year-long review into the scheme,  Labour said it would change the system so that workers were assumed to be employed if there were “obvious signs” that was their true status.

According to latest Treasury estimates around 300,000 workers in construction were in this position – costing more than £380m.

Rachel Reeves MP is Labour’s Shadow Chief Secretary to the Treasury, said: “False self-employment in construction is a scandal that is costing the taxpayer hundreds of millions each year at the same time, as undermining responsible employers and the sustainable development of the UK construction industry.

“The Tory-led government has ignored the evidence and refused to take action. A Labour government will put this right.”

She said that the last Labour government proposed criteria whereby workers would be automatically “deemed” to be treated as employed for tax purposes if they met criteria that most people would regard as obvious signs that they were employees, rather than self-employed subcontractors.

“This will be our starting point. We will of course consult further and work closely with the construction industry to design the criteria so that the right level of flexibility is maintained, that those who are genuinely self-employed are not hit.”

Baroness Donaghy’s report for the last Labour government pointed to self employment as a factor in low levels of training, job security, the likelihood of reporting serious accidents or unsafe practice  in the industry.

Reeves said: “As things now stand, the majority of employers in the sector who do the right thing and pay the right level of tax are vulnerable to being undercut by those who do not. This is not fair and it’s not good for the long term strength and sustainability of the industry.”