A drive to cut Olympic construction costs is threatening to suck in large numbers of “bogus self-employed” migrant workers, leading to widespread tax avoidance and blocked work opportunities for local people, ministers have been warned.

Alan Ritchie, general secretary of UCATT, the construction union, has written to Jane Kennedy, financial secretary to the treasury, and Paul Gray, chairman of Revenue & Customs, warning that a decision by the Olympic Delivery Authority to allow contractors to recruit self-employed workers would encourage tax abuses and reduce site safety.