Firms that make savings by moving IT work offshore could be required to compensate former UK employees under controversial new proposals released today by the Trades Union Congress (TUC).

The plans, which are included in a submission to the government's 2007 spending review and have been given to the chancellor, aim to give financial support to UK workers supplanted by overseas services. They call for the government to mandate insurance for firms that would pay out 70 percent of lost earnings for two years to employees made redundant when work is moved offshore.

Writing in the Financial Times, TUC general secretary Brendan Barber said that advocates of a similar plan proposed in the US calculated that such insurance premiums "would cost companies just four or five percent of the savings they make by offshoring".

A TUC spokesman said that the plans would provide a cushion for workers that lose out as a result of offshoring, adding that the measures might head off a repeat of the current situation in the US. There, calls for protectionist measures are growing as a result of the migration of high-value jobs overseas. "Two thirds of workers affected by offshoring experience a drop in earnings and this would give them a breathing space to develop new skills," the spokesman said.

However, industry experts argued the scheme would prove unworkable in the IT sector. Phil Codling of analyst Ovum said that with so many firms already planning to move more technical tasks offshore it would be impossible to find an insurer willing to underwrite the risk. "It is protectionism by the back door," he added. "I can't see the scheme getting much backing."

Sunil Mehta of Indian trade group Nasscom, which represents the interests of many offshore IT sites based in India, also branded the proposals protectionist and argued they would hinder the UK's competitiveness. "The UK is currently a net gainer from offshoring, but once you begin enacting protectionist measures you hinder the ability of UK firms to compete globally," he said.

The TUC report also recommended the government set up a new fund to provide training and job search support to workers who lose jobs as a result of offshoring and invest more to improve the "employability of workers in industries threatened by global competition". In particular, it urged the government to increase support for science and industry collaboration beyond the current concentration in Oxford, Cambridge and the South East.

Ovum’s Codling said these proposals would be more welcome, adding that the IT sector ought to invest more in reskilling staff made redundant as a result of offshoring. "Certain skills such as programming roles are moving offshore, and industry and government need to act to help retrain those people and give them the IT skills that we still need here," he argued.

The TUC calls came as reports from Reuters stated that global IT services giant IBM is planning to open four offices annually in China over the coming years as it seeks to exploit the country's growing IT talent pool.