He warned that the persons who pay workers such as cleaners or gardeners in cash could be taking money out of the UK economy.

“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,” Mr Gauke said.

“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. That is a large part of the hidden economy.”

 The Government insisted to focus on reforming the tax system.

Tradesmen fail to pay VAT by not declaring payments, Gauke says

“Yes, paying something in cash to get a discount and evade tax and is wrong but at a time when many people can… employ clever accountants to find loopholes and avoid tax at the top and the benefits system at the other end is quite easy to take advantage of… the squeezed middle are wondering about the legitimacy of our tax system.”

Tariq Dag Khan, stated: “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.

“The Government should be providing guidance for alternatives to cash payments for tradesmen, rather than pointing the finger at an industry that is essential to the UK’s economic recovery.”

At the moment there is no law against paying someone in cash  but it can be a way for traders to avoid declaring all their income or paying VAT.

The Government loses about £2bn each year to the black economy as tradesmen fail to pay VAT or income tax by not declaring payments.

Mr Gauke’s comments, in an interview with The Daily Telegraph, came as HM Revenue and Customs wants to encourage workmen to pay their fair share of taxes.

The minister had earlier announced that tax advisers who use avoidance schemes which push the law to its limits will be named and shamed in a crackdown to help recoup £5bn for the public purse.

The Government released a consultation paper about the plans, which follow a wave of disclosures about the financial loopholes used by the rich people.

Those customers will then be formally warned how much they could owe if the scheme fails to stand up to legal scrutiny.

Comedian Jimmy Carr last month admitted to making a “terrible error of judgment” when it emerged he used a complex scheme to reduce his ta