The Treasury missed out on £35bn of tax it was due last year, up slightly from the year before, because of tax evasion, criminal activities and a rise in small businesses failing to pay what they owed.

Small firms accounted for £14.4bn of the 2018 shortfall - almost twice that of large companies and up from £12bn two years earlier.

The so-called “tax gap” includes revenue lost to evasion and avoidance, as well as genuine errors on tax returns, and tax due on criminal enterprises.

The missing tax equates to Britain’s entire public order and safety budget, including all of the Government’s spending on police, courts, prisons and fire brigades.

John McDonnell, the shadow chancellor, said the gap was “a reminder of the scale of tax evasion in this country” and the result of “savage cuts to HMRC, which have deskilled and undermined a key part of the civil service”.

The gap has risen in absolute terms from £29bn 10 years ago but the Government said that at 5.5pc of the total owed, the gap was down from 6pc over the same period.

Jesse Norman, financial secretary to the Treasury, said: “The UK’s low tax gap underlines both how the vast majority of people are paying the correct amount of tax, and how effective HMRC has been in its efforts to clamp down on tax evasion and avoidance.”