Black Economy

HC Deb 25 July 1985 vol 83 cc1295-6

9. Mr. David Atkinson

asked the Chancellor of the Exchequer what is the most recent estimate of the percentage of national income represented by the black economy.

Mr. Peter Rees

Recent estimates of the size of the black economy have varied from 2 to 16 per cent. of gross domestic product. This very wide range tends to confirm the Government's view that it is not possible to form any reliable estimate of its size.

Mr. Atkinson

I thank my right hon. and learned Friend for that reply. Does he agree that the long overdue bonfire controls on small businesses, recommended by the recent White Paper, "Lifting the Burden", will do much to reduce the size of the black economy? Will he give some thought now to introducing a two-year honeymoon, free of corporation tax, to encourage all new business to become better established?

Mr. Rees

I note my hon. Friend's suggestion about a two-year honeymoon. I doubt whether it would be the most effective way of helping small businesses. Indeed, many new businesses do not make much profit in the first two years. The most positive assistance that the Government can give to the smaller end of the economy, as my hon. Friend has perceptively pointed out, is our firm determination to lift the burden on it. As the House will know, measures will be co-ordinated by a committee presided over by my noble Friend the Minister without Portfolio.

Mr. Bellingham

Is my right hon. and learned Friend aware that because of the Government's enthusiasm to tackle the informal economy many reputable small firms are being unfairly victimised? Is he not aware that those people are the real wealth creators? Will he ensure that before their accounts are investigated someone very senior satisfies himself that there are reasonable grounds for suspicion?

Mr. Rees

If my hon. Friend will draw our attention to any cases where there has been victimisation. I am sure that we shall make the fullest possible investigation. As he will see from the latest report of the Board of Inland Revenue, the board has concentrated on the larger, rather than the smaller, accounts.