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Black Economy (Tax Frauds)

Volume 983: debated on Thursday 24 April 1980

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asked the Chancellor of the Exchequer if he will make a statement on his discussions with the Inland Revenue Staff Association on tax fraud relating to between £5,000 million and £11,000 million of untaxed funds from the black economy.

My right hon. and learned Friend has not yet had any such discussions, but we have seen the recent statements made by the Civil Service unions on the black economy.

The figures are slightly speculative, as I am sure the Civil Service unions would be the first to acknowledge. I refer the hon. Gentleman and the House to some of the later work that has been undertaken by the Central Statistical Office, which suggests that the black economy may be running at 3½ per cent. or less of gross domestic product. Of course, we are not complacent about that figure either.

I accept that the real antidote to the black economy is a substantial reduction in direct taxation, but will my hon. and learned Friend nevertheless take on board the fact that this is a serious problem? At the very least, does he expect any information to be fed back by the additional social security inspectors who are to be appointed, so that action can be taken against both employers and employees?

No. We expect to have better information from the revenue departments, which are naturally alert to this problem. I am sure that we shall take positive action in the light of anything that we discover through them.

Is it not time that the Government had a better informed view of this problem, especially as indicators are now being given by people who have expertise in the matter and since the Government have made such a fuss over the question of social security fraud, which is piddling in comparison with the huge amounts involved?

I remind the hon. Gentleman and the House that the first figure was given during the Administration of which he was a distinguished ornament by the then chairman of the board of Inland Revenue to the Expenditure Committee. At that time the number of staff at the Inland Revenue had reached an all-time high, so there is no precise correlation between the black economy and the number of people employed in the revenue departments.