Former bank chief: Scrap £50 note to stop tax-cheat builders

THE Bank of England should scrap the £50 note to curb tax evasion and financial crime, says a government adviser.

Peter Sands, the former chief executive of Standard Chartered, said eliminating £50 notes would stop an “underground economy” that sees builders, plumbers, and other tradesmen avoiding tax by being paid in cash.

“The incentive is tax evasion, since payment in cash makes it easier for the individual to avoid VAT of 20 per cent, and if the builder pays his workers in cash, he in turn avoids employment taxes and they avoid income tax,” Mr Sands, who provides informal advice to the Prime Minister on issues such as changes in the labour market, wrote in a study for Harvard Kennedy School.

Corrupt payments worldwide total $1 trillion (£693 billion) and up to 70 per cent of lost tax income, the research paper claims. Mr Sands, who was one of the architects of the banking bailout in 2008 and is now a non-executive director for the Department of Health, said scrapping the £50 note could also aid the fight against terrorism. “Without being able to use high denomination notes, those engaged in illicit activities… would face higher costs and greater risks of detection,” he wrote.

The European Central Bank has placed its policy on issuing €500 notes under review over fears they are being exploited by criminals. The UK asked banks to stop handling the notes in 2010 after a report found they were used in 90 per cent of criminal cases.

Mr Sands, who quit Standard Chartered last year after soaring debts caused profits to collapse, has urged the world’s 20 largest economies to take up the matter before a global summit in September. The former bank chief has also advocated scrapping the €500, $100, and 1,000 Swiss franc notes.