Cash is tight, so why turn down free money?

I spent last night at the annual dinner of the Association of Revenue and Customs. Getting drunk with a 200 or so tax inspectors may not be everyone's idea of fun, but they're a lively bunch and among the sharpest people I know. These are not the ones who come round to snoop through your books and hassle you for missing receipts. These men and women do multinationals for millions, sometimes billions, of pounds. Money they owe us. Money we use to build hospitals and schools. Or money we could be using to reduce the deficit that's frightening the life out of our new government ministers.

With no money left, tax inspectors should be feeling loved at the moment. But instead, everyone I met was full of foreboding. The department is constantly being reorganized and with each round comes a further squeeze on senior posts and cuts in funding for things like training and research. The Labour government's treatment of the Revenue was lamentable, but far from investing in this money-spinning outfit, everyone is expecting the new government to wring further "efficiency savings" out of this battered and demoralised department.

Remember this isn't a department that costs money, it makes money, and every extra pound it raises from people and companies trying to avoid tax is a pound more to spend on the things we like, or a pound less that we have to stump up ourselves. So little work has been done on tax avoidance (exploiting loopholes) and tax evasion (illegal fraud) that no one really knows how much money we're losing, but we do know that it's a lot: estimates for corporation tax alone range from £3.7 billion to almost £14 billion (more than twice as much as the coalition wants to cut this year). And that's before you even start looking at VAT fraud, income tax fiddles and capital gains tax scams.

Every tax inspector I met last night brings in tens if not hundreds of times their own salary in additional tax revenue, so why aren't there more of them and why aren't they better supported? If the new government is serious about reducing the deficit, rather than just cutting spending for the sake of it, it should invest in this valuable resource - give these people what they need and let them get on with the job. In the coalition's policy document, published today, there is a single terse sentence: 'We will make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals.'

We'll see.