In his strongest backing for the controversial concept of a uniform rate of tax on all income and earnings, Mr Osborne will use a speech to the Social Market Foundation to advocate it forcefully. The Shadow Chancellor, who is setting up a Tory “special commission” under a senior business figure to investigate flat tax, will argue that it embodies all the qualities of a good tax system.

He will say: “We need to return to the principles of a transparent, simple, efficient and fair tax system. An idea gaining popularity that promotes all of these principles is the concept of a flat tax.” Highlighting the rapid adoption of flat tax systems across much of Eastern Europe, and the growing debate over the policy in Germany, Mr Osborne will lay out what he sees as its key merits.

With all income taxed at the same rate, reliefs and exemptions scrapped, and corporate tax rates the same as on income, he believes inefficiencies introduced by different rates of tax on different activities would be removed.

“Compliance costs fall, and the war of attrition between accountants searching for loopholes and taxmen trying to sew them up is ended: loopholes are abolished,” he will say. Arguments that a single rate of tax on income would be unfair are dismissed by the Shadow Chancellor. He will insist that a flat tax can be very progressive — owing to a single, much increased, basic personal allowance above which tax starts.

He will argue that the Tories should put “fairness” at the heart of their tax policy.

Mr Osborne concedes that his party has failed successfully to make its case for lower tax at three elections and accepts that there are “major obstacles” to a flat tax system. He still believes there is a strong case for such an approach.

He will accuse Gordon Brown of replacing transparent tax with “stealth” measures, and greatly increasing the complexity of the present system.

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