On Wednesday, George Osborne grew in stature as a Tory Chancellor. The Budget was the most definitive account of the government's plan for growth. Yet it was mainly framed as a tax reform budget, and it is by this standard it should be judged.
In which case, it was also something of a curate's egg. In places it was bold and radical, while in others it did not go nearly far enough.
Mr Osborne articulated a clear, long-term vision for tax reform. He began by claiming Adam Smith as his guide, embracing the principle that taxes ought to be "simple, predictable, support work, and they should be fair".
The establishment of the Office for Tax Simplification (OTS) demonstrated Mr Osborne's commitment to sustained reform of a tax code that must be "fit for the modern world". (This already comprises measures such as merging the rates of income tax and National Insurance.)
There is the Personal Tax Statement, first proposed by Ben Gummer MP, which will appear for the first time in 2014. It will tell taxpayers exactly how much they are paying in tax and exactly where that money is being spent. This is particularly important at a time when people do not know how much of their hard-earned cash is consumed by the costs of servicing our £7.9 trillion debt.
At the heart of this Budget is the start of a serious shift in taxation from income to wealth.
The 50p top rate of income tax will be reduced to 45p in April 2013, but Mr Osborne has already reassured Conservative MPs that the new top rate will not be permanent. Following the announcement on Wednesday, Ed Miliband immediately rolled out the tired old rhetoric of faux class warfare. The fact is that the top rate was not raising any meaningful revenue - a mere third of what was promised - and as page 91 of the Red Book proves, it will actually be the millionaires paying more after this Budget.
The group of taxpayers that Mr Osborne ought to be most concerned about are the taxpayers still stuck in the 40p higher rate, between £41,450 and £150,000, especially since he has just shifted 300,000 new taxpayers into that category.
This situation is not helped by the changes to Child Benefit. What the economist Andrew Lilico has persuasively argued is a tax rebate, not a welfare benefit, has effectively been taken away from the important 'squeezed middle' at a time when living costs are still rising painfully.
Then there is the so-called 'Granny Tax', which was 'unearthed' by linguistically creative journalists hours after the Budget. Despite the Brown-esque manner in which it was delivered, the policy remains a sensible one. Mr Osborne has said that the age-related allowances will be frozen from April 2013 onwards. The impact has been exaggerated, as Sara hinted at yesterday, and it will be alleviated by the planned increases in the personal allowance.
This leads on to the Liberal Democrats' key victory: the acceleration towards a £10,000 income tax personal allowance. As a result of this Budget, no-one will pay income tax on their first £9,205 as of April 2013. Everyone working for the minimum wage will see their income tax bill halved.
This has not stopped Conservative MPs from claiming some credit for the policy, as Nick Boles did during the pre-Budget PMQs, and as Robert Halfon's fascinating Right Angle campaign web site has done of late.
However, what really matters is how these tax changes are funded. Mr Osborne, under pressure from the Lib Dems and even Tories such as Boris Johnson, unleashed a new set of measures to target wealth, largely through tinkering with Stamp Duty.
A new 7% rate will be levied on £2 million properties and a new 15% charge will be used to crack down on the use of corporate envelopes to avoid tax when purchasing properties.
Capital Gains Tax (CGT) will also be extended to residential properties being held by overseas envelopes. This will be accompanied by a new range of anti-tax avoidance and evasion measures.
Altogether, it means that the richest will pay up to five times more than they would have done with the 50p income tax rate.
This is the correct direction of travel for direct taxation. Wealth should be taxed in a manner that is fair and which encourages wealth creation. Yet it still remains the case that the best way to do this is a Land Value Tax (LVT), within the context of simplified property taxes.
The main rate of corporation tax was reduced by 2 points, which will eventually mean corporation tax of 22% in April 2014 - well below the level of comparable countries like the United States but not as low as Ireland's 12.5%. Mr Osborne wants the rate to come down to 20% by 2015.
But the method taken to fund the reductions in corporation tax was misguided. The bank levy is one of Mr Osborne's more harmful gimmicks and has yet again been increased (to 0.105%) at a time when our financial services industry needs to be made more competitive, not less.
Mr Osborne has also taken a leaf out of Sir Geoffrey Howe's book by increasing indirect taxes on consumption (e.g. 5% hike on tobacco duty) to fund deficit reduction and ever-increasing public expenditure. Albeit to his credit, he has managed to keep fuel and vehicle excise duties lower than they would have been under a Labour government.
George Osborne's vision is of a tax code that is more transparent, where direct taxation moves away from income towards wealth, in which a more competitive business tax regime can boost growth, and where taxes on consumption help to maintain 'fiscal stability'. Regrettably, political gimmicks like the bank levy and other tax raids continue to infect Mr Osborne's agenda.
Earlier this week, I asked whether George Osborne could join Neville Chamberlain and Sir Geoffrey Howe among the pantheon of great Tory Chancellors. Wednesday's Budget brought him closer to the mark, but not quite the whole hog. His fiscal plans have been blown off course since last November and we are yet to experience the full dangers of the largest experiment in quantitative easing ever embarked upon.
This article first appeared on the Egremont blog on 23 March 2012Suggest a correction