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Last Updated: Friday, 27 February, 2004, 12:44 GMT
What is the black market's value?
By Ollie Stone-Lee
BBC News Online political staff

Cockle pickers
The cocklers tragedy underlined the problem of illegal labour
The prospect of new migrants arriving in the United Kingdom is forcing ministers to wake up to the scale of the black economy, says an academic.

But Nottingham University's Prof Colin Talbot says there is no coherent plan because ministers are embarrassed about their lack of control over this sector.

He says the cocklers' tragedy was the tip of the iceberg of a black economy spanning far beyond illegal migrants.

The sub-economy could be worth anything from 53bn to 137bn a year, he says.

And it could involve between 1.4m and 3.6m workers, he suggests.

The shadow economy ranges from illegal migrants working secretly in Britain to the unemployed man who does some decorating jobs on the side in the run-up to Christmas or a London-based network of bogus companies claiming 4m in benefit fraud.

Rising profile

By definition, however, the black market cannot be accurately measured.

Ministers commissioned a report into the issue in 2000 which said billions of pounds were lost each year to the informal economy.

The deaths of migrant workers in Morecambe Bay, and concerns over migration from countries set to join the European Union, have seen the issue topping the political agenda.

David Blunkett
Blunkett wants to prevent more growth of the sub-economy
Home Secretary David Blunkett cited fears about migrants from new EU member states joining the black market as a key foundation of his new work registration scheme.

Prof Talbot points to estimates from International Monetary Fund (IMF) economists that shadow economies have now reached an average of 17% of national wealth for OECD countries, including the UK.

He suggests the British figure on the basis of those estimates could be 13% of GDP but even the lower suggestions of 5% would put the black market's value at 53bn.

The cocklers' deaths put the focus on gang masters and the role of illegal immigrants, but the academic has a different perspective.

"The important thing about this, and it's where people go wrong, is they assume it's all illegal migration and criminal activity," he told BBC News Online.

"But actually all the evidence suggests the vast bulk of these activities are totally legal but just not registered."

The 'disappeared'

Prof Talbot is organising a conference on the issue in May called "the invisible hand's shadow".

He says census figures recorded about a million fewer people in 2001 than previous surveys suggested would be living in England and Wales.

Census chiefs say the overall population figure was smaller than expected because of ''the great difficulty in calculating immigration and especially numbers of people leaving the country''.

ID card
Identity cards could be part of tackling the problem
Registrar general Len Cook has said the rave culture in the Mediterranean, expansion of higher education and "gap years", and a number of other factors might have contributed to a large number of people in their 20s not being in the UK on Census day.

But Prof Talbot argues that such factors cannot fully account for such a large gap and suggests many people have disappeared into the shadow economy.

He says the ramifications for policy making extend beyond the fact people are failing to pay tax but still claiming the benefits of public services.

For example, the Foot and Mouth Disease outbreak showed the dangers of unregistered movements of meat and livestock.

And the problems endured by the Child Support Agency, which in 2002 wrote off more than 2bn of debts, were much down to the fact that it was impossible to trace many absent fathers through the tax and benefits system, says Prof Talbot.


Policies like the poll tax, which prompted serial non-payment protests, also gave a boost to an already growing black market.

For the future, there are dangers that many of these unregistered people are likely to return to the official registers in time to take their retirement state pensions.

The underground economy also "provides the sea" in which terrorists and their money can move.

The public policy expert suggests the government is now beginning to wake up to the problem.

"It is beginning to dawn on people ... but there is no really coordinated response to it."

One solution, perhaps too politically sensitive for any government, would be to grant an amnesty in an effort to draw back black market workers who could not afford suddenly to pay back years in missed tax.

'Carrot and stick'

Research in Canada suggests that periods of recession see people drift into the shadow economy but the reverse does not happen when the good times return.

Lord Grabiner's report recommended tougher enforcement mixed with incentives for those in the shadow economy who want to "come clean".

Ministers on Tuesday said illegal migrant workers would face "no retribution" if they now registered their work, but they denied this amounted to an amnesty.

On the "carrot" side, the government has taken up ideas like a confidential phone line to give people advice.

And penalties like the new offence of fraudulently evading income tax are paying dividends, it suggests.

Mr Blunkett's plans for a national identity card could also counter the problem in the longer term but Prof Talbot says a coherent strategy is needed now.

UK action on gangmasters 'flawed'
13 Feb 04  |  Politics
Rich pickings for big risks
06 Feb 04  |  England

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