South West Hertfordshire MP David Gauke has branded paying cash to tradesmen “morally wrong” as it leads to higher taxes for others.

The Conservative, who is exchequer secretary to the treasury in the coalition government, urged residents not to be tempted by workmen’s offers of cheaper rates for VAT-dodging cash payments, saying it fuelled a “hidden economy”.

In an interview on BBC’s Newsnight last night Mr Gauke said he had never sought such a discount himself, but could not vouch for any of his colleagues in government.

In the programme Mr Gauke, distanced himself from a national newspaper article in which he was quoted as calling the practice “morally wrong”.

He said: “The specific point I was making is that when a tradesman says here is a 10 per cent, 20 per cent discount on your bill if you pay me cash-in-hand that is facilitating the hidden economy.

“That is a bigger problem in terms of loss to the exchequer in tax avoidance. That is meaning that revenue is not being paid that should be paid.”

Mr Gauke later added: “I have never said to a tradesman if I pay you cash can I get a discount, no.”

When asked if he knew if any of his colleagues in government had paid workmen cash-in-hand, Mr Gauke responded: “I don’t know. But I think if people do do that they have to do so with the recognition that that means taxes will have to be higher for the rest because that hidden economy is a part of the scam.”

The MP’s comments came as the government revealed new plans to crackdown on tax avoidance.

Yesterday Mr Gauke outlined initiatives to the think tank Policy Exchange such as getting firms to name clients who were using aggressive tax avoidance strategies.