AFICIONADOS of Gordon Brown’s style have adapted to the ways of the small-print Chancellor. Don’t bother about his speeches on the Pre-Budget Report or the Budget. Dive into the accompanying papers to find new stealth taxes. They did not have to look far this month.

A more steeply graduated annual car tax, portrayed as a green tax on a few rich people’s offensive gas guzzlers, soon turned out to be a widespread rise in tax for lots of ordinary family motorists.

Tax experts were soon aware that an axe had been swung at private trusts. We noticed, as no doubt did Alan Johnson, the Trade and Industry Secretary, that the Royal Mail did not figure in the long list of state assets that the Treasury planned to privatise. Opposition politicians swiftly realised that pensioner households will face an average rise of a quarter in their council tax bills.

We laughed that the Chancellor was withdrawing the tax concession for employees to be supplied with home computers just as lumbering government departments were about to set up their own schemes. Such is the whimsy with which Mr Brown uses taxes to alter people’s behaviour that concessions are continually being given in one Budget and taken back in the next. Back in 2004, a zero corporation tax band was billed as a heart-warming aid for micro businesses. Within months it was transformed in Treasury thinking into an evil tax loophole that must be slammed shut.

Tax breaks for investors in venture capital have been reduced, the number of qualifying investments has been slashed but much higher contributions will be allowed in the coming tax year. For 2007-08, if Mr Brown is still in charge, the regime may well be different again, unless people arrange their affairs exactly as the Chancellor intended.

Taxes change relative prices and therefore distort economic behaviour. So it is inevitable, and perfectly proper, that chancellors will design their levies to fall hardest on people or practices they dislike most. Tax differentials serve a purpose, for instance, in hastening the switch to greener vehicle fuels.

A chancellor’s whims become chaotic and destructive, however, if he tries to distinguish between good and bad taxpayers at every turn. As part of the Treasury’s drive to raise more tax from companies, Revenue & Customs is cracking down on what it sees as possible loopholes. Members of the National Association of Pension Funds are now up in arms because the Revenue is planning to disallow many of the extra pension contributions that companies are putting in to make good fund deficits.

Taxation by whim ceases to be a joke when it wrecks the long-term plans people have to make in areas such as pensions and family finances. Ministers have got into such a mess over public sector pensions that, in order for a 23-year-old graduate joining the civil service today to retire at 60, low-paid council workers are set to lose humbler perks.

The Budget attack on trusts seems to combine malice, prejudice and miscalculation. For the first time, under the new tax rules, many spouses will have to pay inheritance tax when their partners die. They live in families that dare to put assets in trust for future generations. The Treasury has no idea how many people will be hit by the punitive new regime, which is designed to sweep away most family trusts, but it will clearly not be the few rich people that the Treasury ritually identifies at such moments. In Browntopia, people who set up family trusts are bad people. Their motive must be to avoid tax for no better reason than to let their children inherit. He sees no reason why people should want to keep legacies from grandchildren until they are 25, So in the Treasury view, that is an illegitimate activity that should be taxed out of existence.

In theory, the Treasury is on a drive to stop inheritance tax being a voluntary tax. Except that it isn’t. Mr Brown is only too happy for you to pay nothing at all provided that you use the money in the ways he prescribes, such as investing in private business, venture capital or AIM-quoted companies.

You can try woodland, or family farming, which by common consent would be wiped out if subjected fully to the tax. But passing a nice little family home on to the next generation, as billions of people round the world aspire to do, is antisocial. Ordinary people will become aware of the evils of inheritance tax for the first time as the price of the average home overhauls the tax-free allowance and attracts 40 per cent tax.

Death duties could easily be reformed to become a big revenue earner at low tax rates. But this cannot happen as long as government or opposition still wants it to be a punitive lever of social engineering and a toy for chancellors’ whims.

graham.searjeant@thetimes.co.uk

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