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Thursday, 9 March, 2000, 15:54 GMT
Living in the black
Market traders
Cash only: The humble street market can hide a black economy
By BBC News Online's Jonathan Duffy

At last, conclusive proof that politicians are a race apart. When quizzed about his new crackdown on the black economy, Chancellor Gordon Brown boasted he had never paid a builder cash in hand.

But where Mr Brown leads many "mere mortals" could not claim to follow.

According to the Construction Confederation's latest figures, 5.1bn of building work is carried out each year by workmen who don't declare their earnings.

London taxi
Licensed taxis go by the book, but mini cabs can be a different story
The cost to the Exchequer in lost tax revenue - mostly VAT and income tax - was 500m.

Much of that was down to normal "upstanding" homeowners keen to keep a grip on their domestic purse strings.

If Mr Brown is successful in bringing the black economy to heel, then the impact will be felt by almost everyone.

As Lord Grabiner's report, The Informal Economy, points out, it's not only benefit cheats and builders who are to blame.

Domestic service, market trading, tourism, fashion and clothing manufacture are all cited in the report as examples of the hidden economy.

"Typically, businesses in the informal economy tend to be low-wage and labour intensive, often with a seasonal or irregular element to their work," states the Grabiner report.

Building site
"Cowboy" builders cost the Treasury 500m a year
From small-scale moonlighting upwards, only when you stop to think about the true extent of the black economy, do you realise it's a fact of everyday life for millions of us.

"It's all around us, and it's hard to avoid coming into contact with," says Tony Cohen, a tax partner with Arthur Andersen.

"In my personal experience, it seems to be mostly among cash businesses where there is no paper trail, that is no receipts are given."

So where might you find the hidden economy?

  • Cigarettes and alcohol - The high cost of duty at home on cigarettes and alcohol coupled with a relaxation of laws on importing duty-paid goods for personal consumption has led to an explosion in the bootleggers' trade.

    A recent treasury select committee report found tobacco and alcohol smuggling cost Britain 1.2bn in lost tax alone. Trade is not necessarily conducted from the back of a van. Many licensed pubs and shops are complicit in the business.

  • Domestic staff - While nannies, cleaners, au pairs, gardeners and other domestic staff are often in the employ of well-off and "well-to-do" families, cash is the most common form of payment.

    Only 23,000 people are on the Inland Revenue's Simplified Deduction Scheme for paying domestics, even though 50% of mothers of pre-school children go out to work.

  • Travel - Next time you are walking home from the pub and are stopped by a willing mini-cab driver, don't try to pay by cheque. Often it's another face of the hidden economy, just like ticket touts who, by re-selling Travelcards on the London Underground, contribute to the 30m lost annually in fraudulent travel.

  • Counterfeit goods - The crafty street trader with a suitcase full of perfumes "for the Missus" and many established market traders will accept cash only.

    Consumer Affairs Minister Kim Howells says the fake clothes and jewellery market is worth about 3bn a year. The same price is put on the bogus computer software market.

  • Tipping - Waitresses, hairdressers and cloakroom attendants are all supposed to declare gratuities. But cash tips are often pocketed immediately.

  • Kids' stuff - The bob-a-job spirit loses its sheen when you consider that, according to children's charities, about 1.5 million British youngsters are employed illegally in jobs like delivery, baby sitting and car washing.
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See also:

09 Mar 00 |  UK Politics
Brown targets benefit fraud
30 Jul 98 |  UK Politics
Billions lost through fraud
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