Yes, this was an important political moment. Tony Blair's government has put up taxes before. Often. Wednesday was different. Gordon Brown owned up. More than that, the chancellor came as close as he decently could to boasting about it. If Britain wants good public services, above all modern hospitals and enough doctors, Britons will have to pay for them. After all those detours along a road to nowhere called the Third Way, Mr Blair's government has finally settled for something called social democracy.

The Budget wasn't Old Labour socialism. Mr Brown's sleight of hand on national insurance contributions has in effect pushed the top rate of income tax up to 41 per cent. And business will fume about increases in employers' contributions. But the pips are not squeaking yet - and anyone with share options has been given a big windfall bonus through the cuts in capital gains tax. By the end of this parliament public spending as a share of national income will still be in line with the proportions seen in the heyday of Thatcherism during the 1980s. Similarly for taxes. Mr Brown has guarded too his reputation for fiscal conservatism. There are the usual Treasury fiddles with the arithmetic, but the chancellor is still playing within his self-imposed rules.

That said, direction counts in politics. This Budget foreshadows a sharp change in perceptions. The self-declared purpose of the government's first term was to show that New Labour had rid itself of the Old Labour addiction to tax and spend. Now that it has proved (to itself anyway) that it is a social rather than a compulsive spender, it can spend again. And how. Only we must not call it spending. Investment sounds a lot less threatening.

Mr Brown has given the voters a picture of public spending rising as far as the eye can see. He has explained how he will pay for it for the next two or three years or so. But beyond that? Those who witnessed the relentless ducking, diving and deliberate evasion by Messrs Blair and Brown during last summer's election campaign must be forgiven a certain cynicism. This is unlikely to be the last tax-raising Budget.

All this creates space for the Conservatives - room for an argument about the size of the state and about the financing of health and other public services. Forget about precise levels of spending this year or next. The medium to long term is where the debate will lie. Should Britain really be resigned to an inexorable expansion of state-funded services and the higher taxes to pay for them? Don't those Europeans, with their social insurance system, have something we can learn from? After all, Derek Wanless's review of the NHS, which Mr Brown has taken as his bible, says that health spending (and by implication taxes) will have to grow faster than the economy for the next 20 years. That's the point intelligent Conservatives will now be making.

Mr Brown's contention is that the Wanless report draws a line under the argument about how to fund health spending. On the contrary, that debate has just started. If the flood of taxpayers' cash into the NHS produces sharp improvements before the next election, Mr Brown may well be proved right. But that is a big "If". More likely, it will take time for the resources to make a visible impact. Doctors and nurses have to be trained, new hospitals built. The pain of the tax increases will be felt sooner. If the perception is that all the money is fast disappearing into a large black hole, the financing issue will move back to the top of the agenda. That's the gamble of this Budget.

On taxes, Mr Brown did not have much choice. Those tricksters in the Treasury have run out of stealth taxes. The government's decision at the last election to rule out rises in income tax rates forced it into the corner of higher national insurance contributions. And now it intends to spend serious money. Labour's first decade in office, Mr Brown boasted, will see spending on the NHS double in real terms. On top of these unprecedented increases, this summer's comprehensive spending review will see the education and transport budgets still expanding much faster than the economy as a whole.

You cannot but admire the chancellor's performances. Gordon Brown at the House of Commons despatch box is as good as it gets. Sure, the posture is self-satisfied, the style hectoring. But here is a politician who understands the power of the words. Perhaps I misheard, but I feel sure that at one point he declared it was the government's patriotic duty to raise taxes.

It is more than rhetoric. Mr Brown speaks from the conviction that government can remould society - that fairness and enterprise can indeed sit comfortably side by side. The mind-numbing complexity of the plethora of tax credits he has introduced for children, pensioners and the working poor belies their importance in redistributing wealth to the worst-off in society. Simultaneously, the tax breaks for entrepreneurs reflect a genuine belief that government can fan the embers of enterprise. This is a complex politician.

The risks are the obvious ones. Change takes time. For all the mantras about modernisation, private-public sector partnerships and the rest, the government has been peculiarly inept in managing public services. It still seems hopelessly confused about where the boundaries should lie between public and private delivery of taxpayer-funded services. Obsessed by centrally-set targets, it has yet to grasp that those responsible for delivering services should be left to get on with it. And, of course, all its spending plans are based on a presumption that the economic climate will never again turn nasty.

For the present, Mr Brown has probably caught the mood of Britain. Modernising public services is worth a shot - even some pain. But this Budget asks the voters to take the government on trust. And trust in politicians is in scarce supply these days.

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Special report: Budget 2002

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