24/07/2012 08:06 BST

David Gauke's 'Morally Wrong' Comments Draw Fire From Tradesmen

David Gauke, the Treasury minister who said it was "morally wrong" for householders to pay tradesmen in cash for a discount, came under fire on Monday from a body representing plumbers, builders and electricians.

Gauke sparked controversy after accusing homeowners who give workers cash of helping them avoid tax, saying: "Getting a discount with your plumber by paying cash in hand is something that is a big cost to the Revenue and means others have to pay more in tax.

Tariq Dag Khan, from the tradesmen recommendation website Rated People, said on Tuesday: "David Gauke's comments that it is morally wrong to pay tradesmen in cash do little to help tradesmen who are struggling in a difficult economic climate.

"I think it is morally wrong. It is illegal for the plumber but it is pretty implicit in those circumstances that there is a reason why there is a discount for cash."

"The reality is that there is little or no alternative to cash payments for many tradesmen, and criticising the whole industry belies a misunderstanding of the situation many customers and tradesmen are in," Khan added.

"There is a great deal of trust involved when hiring a tradesman for both the tradesman and the customer and therefore cheque payments do not provide a viable alternative especially when, if the cheque bounces, the tradesmen could be dangerously out of pocket and in some circumstances forced out of business as a result."

The Government claims to lose about £2 billion each year to the black economy, as tradesmen fail to pay VAT or income tax through not declaring payments and keeping them "off the books".

Gauke's comments, reported in The Daily Telegraph, come as HM Revenue and Customs plans an amnesty to encourage workmen to pay their fair share of tax.

The minister also told BBC's Newsnight some Tory ministers may have previously paid workers in cash, but denied doing so himself.

"I've never said to a tradesman, 'If I pay you cash, can I get a discount?'," he said.

But asked if colleagues had, he replied: "I don't know, but if people do do that they have to do so with the recognition that means taxes will be higher for the rest."

Labour leader Ed Miliband, on a visit to Paris to meet French president Francois Hollande, waded into the row, saying ministers should be focusing on large-scale tax avoidance.

Asked whether paying cash in hand was "morally wrong", Mr Miliband said: "What I say is that the job of government is to pass the right laws to clamp down on tax avoidance - that's the most important thing of all."