I never thought I'd live long enough to say this, but well done Alistair Darling. His announcement yesterday of a £600 rise in the basic income tax allowance is to be welcomed in three senses.

First, he has avoided the temptation to help out the losers from the abolition of the 10p tax rate by further complicating the tax system. He seems to have learnt what Gordon Brown didn't as Chancellor - that the best way to help the low paid is to lift them out of the tax system altogether, and that the best tax system is usually the simplest. The 10p tax rate was a gimmick, rather than an efficient way of helping the poor.

Secondly, he has recognised that the interests of the low paid and the interests of most voters are, to a large extent, the same. In helping one, he's helping the other. This sends an important message that politicians of both parties have overlooked for too long; the low paid are not a group cut off from the rest of society and requiring special help. Official figures show that median pretax full-time wages last year were just £457 a week. That means the median voter is close to the low paid.

Thirdly, Mr Darling is striking a blow against the tired cliché that chancellors must be fiscally prudent. He's financing this handout not by a Brownite stealth tax but by the simple expedient of increasing borrowing.

This would take Mr Darling's planned borrowing this year to £45.7 billion. That means net debt could get very close to the 40 per cent of GDP limit that Mr Brown set back in 1997; the Treasury forecast in the Budget that it would be 39.8 per cent of GDP in 2010-11.

Isn't this reckless? Many commentators say it is. But there is only one man whose opinion really matters. And he doesn't care.

That man is Mr Market. Long-term real interest rates - longer-dated index-linked gilt yields - are less than 1 per cent. The market is therefore content to lend to the Government at rock-bottom rates. And if the market is offering Mr Darling the chance to get out of trouble cheaply, why shouldn't he take it?

In this respect, the Chancellor is doing something that the US presidential candidates seem unable to do - he is recognising the benefits of a globalised economy. The fact is that real interest rates are low not because markets have faith in Mr Darling's stewardship of the public finances, but because the world is awash with savings looking for a safe home.

The Asian and Middle East economies are not just growing fast, but are saving much of the proceeds. And their problem is that they have few obvious safe havens for these savings. Their domestic banks are rickety, equities are too risky and their domestic government bond markets are underdeveloped. There has been, in the words of Ricardo Caballero, a Massachusetts Institute of Technology professor, an asset shortage. This has led to rising commodity prices, a surprisingly easy financing of the US current account deficit in recent years, and low bond yields in the Western world as Asian savings look for a home.

Mr Darling is taking advantage of this. And, in doing so, he is saying: the emergence of India and China isn't just a threat to our jobs, but an opportunity for us. In buying our assets, the Asians are helping us out. Contrast this with the dark days of the 1970s, when economists feared that increased government borrowing would “crowd out” private sector activity by raising interest rates.

Globalisation, and the growing wealth in Asia, then, is no bad thing. But isn't there something to be said against this? Yes. It's not that Mr Darling is putting us in hock to foreign investors. Well, he is, but £2.7 billion is chickenfeed in a £1.4 trillion economy.

Instead, the problem is that he is in fact redistributing income. Higher borrowing means higher future taxation. The Chancellor is therefore taking income away from future taxpayers to give it to current ones.

Now governments are always tempted to do this, as future taxpayers don't have a vote. This is why Mr Brown's rules limiting public borrowing were - are - good ideas. Although they are arbitrary in themselves, and no great near-term economic harm is done if they are breached, they act as a reminder, telling us we must not impose too high a burden upon the future.

This raises an old question in moral philosophy: what are our obligations to future people?

On one view, we should treat them just as we would living beings. This is the justification for paying so much today to avoid the threat of climate change. But on another view, it's reasonable to make future people pay more. They will be richer than us, and so can afford it. If the economy can grow at 2.5 per cent a year in real terms - below the Government's estimate of trend growth - the average Briton in 2058 will be 3.4 times as rich as he is today. So why shouldn't we tax him a little more?

There's just one problem with this, though. If it's acceptable to tax future people more highly because they are richer than us, why shouldn't we tax the rich today more as well?

Could it be that Mr Darling has chosen not to do so not because of a sophisticated argument about the lower moral status of future persons, but merely because of brute politics - today's rich are, he believes, too powerful or too likely to move offshore if they are taxed more?

Even apparently admirable announcements, then, are motivated more by low practical considerations than by clear moral thinking.

Chris Dillow is an economics writer at the Investors Chronicle

Times Recommends

• We must lead the world to stability
• The recession's a blessing in disguise
• The guilty men who sent mum to Iceland