Gordon Brown, to nobody’s great surprise, has been accused of trickery, stealth and robbing Peter to pay Paul. How valid are these criticisms of the “tax-con” Budget? And what do they tell us about the political instincts of this century’s longest-serving Chancellor?

The con-trick criticisms are mostly spurious. The Chancellor was unusually straightforward in stating, at the very start of his speech, that this Budget would be broadly neutral, with no room for any net tax reductions. It was therefore perfectly clear that any tax cuts announced would be matched by increases elsewhere in the system. All the main tax increases — the abolition of the 10 per cent starting tax band, the increase in national insurance and the reduction in corporate investment allowances — were presented straightforwardly and were clearly costed in the Treasury’s Budget documents.

Neither could Mr Brown be accused of pointless meddling just because he left the total tax burden unchanged. The fact is that Mr Brown delivered exactly what most economists, tax experts and business lobbyists had long been demanding — a simplification of the tax system combined with an improvement in its efficiency, achieved by reducing marginal tax rates and simultaneously broadening the fiscal base. The only element of presentational trickery in Mr Brown’s main reforms was his failure to spell out his tax increases within the Budget speech itself. This may have seemed like clever politics to Mr Brown, who obviously spent a long time rehearsing the last few lines of his speech, in which he threw his income tax bombshell. But this is the kind of parliamentary game that gives politics a bad name. Mr Brown should surely recognise that he has much less to gain from scoring cheap debating points off his political opponents than he has to lose from an image of dishonesty and stealth.

Mr Brown’s habit of giving with one hand and taking away with the other raises a more important issue. This is the widespread misunderstanding about the merits of a simpler tax system.

Mr Brown is often accused of stifling business because of the armies of accountants needed to negotiate the tax system. Such criticisms largely miss the point. The benefit of tax simplification is not to strip pages out of tax codes nor push accountants into the dole queues. It is to reduce the unintended economic distortions created by taxes.

I stress the word “unintended” because many taxes are specifically designed to distort economic decisions, for example, the decision to smoke or to drive a polluting car or to give to charity or invest in employee training and scientific research. High marginal tax rates accompanied by numerous offsets are undesirable because they encourage us to do things that we would not want to do in the absence of tax incentives, for example, invest in unnecessary equipment or put our savings into economically unproductive tax shelters. When Mr Brown is accused of damaging the British economy by complicating the tax system, therefore, he should be judged not by the number of pages in the tax code, but by the main aspects of Britain’s economic activity that are most susceptible to tax incentives.

The most important of these are employment, business investment and personal saving and in each of these cases, the distorting effects of taxes now seem to be weaker than they were before Mr Brown became Chancellor. Employment has grown rapidly since 1997, suggesting that tax credits for the working poor have reduced the disincentives to work that existed in the old social security system. The taxation of savings has been greatly simplified by the reduction of fiscal benefits for pensions and insurance. Economic liberals should surely welcome the gradual replacement of defined-benefit company pensions with Isas and portable pensions which individuals can control and manage themselves.

As for business investment, small companies and entrepreneurs have benefited hugely from the reduction of capital gains tax on business assets to just 10 per cent. The impact of taxes on large companies’ investment is less obvious, but the 7 per cent real growth in business investment last year (with a similar increase forecast for 2007) is strong by both historic and international standards. Moreover, the shift of investment from loss-making firms in capital-intensive manufacturing industries into more profitable service businesses is exactly the result expected from reducing tax distortions.

Ironically, it is actually for his failure to create bigger tax distortions that Mr Brown can be more justly criticised. Tax distortions, while they may interfere with economic incentives, can be used for this very reason to serve constructive social purposes — and they can usually do this more efficiently than regulation, rationing or subsidies. The obvious examples are reduction of smoking, alcoholism and air pollution, but high taxes can in principle be used to discourage many other anti-social activities, for example, road congestion.

Yet Mr Brown has been surprisingly coy about such political use of the tax system, reducing the proportion of revenues raised from energy taxes, freezing alcohol taxes and increasing tobacco taxes only at the rate of inflation.

On the basis of his tax record, therefore, it is hard to present Gordon Brown as a manically meddling control freak, determined to bend the structure of the British economy to his whims. He has reduced the distorting effects of Britain’s tax system on employment, savings and investment. If he can be faulted for anything, it is using the tax system too little, not too much, in pursuing public policy goals.

This suggests two possible conclusions about his political character. He could be more committed to liberal economic principles than generally supposed. Or he could be a political coward, afraid of taking on motorists, smokers and other groups. Maybe he is a bit of both.

Times Recommends

• Britain doesn’t need a dose of shock therapy
• Why the sea eagle has no right to land here
• Let older women have a voice at the BBC