Smith’s third principle, transparency, is not just a good in itself; it is also vital to maintaining trust and public confidence in the tax system. But the biggest enemy of transparency is complexity, and our tax code is probably the most complex in the world. That is why we are working with the experts such as PWC and Grant Thornton to do the long-term thinking on simplification. And it is why the final aspect of the proposals being examined by ­Geoffrey Howe’s group will be so important — the establishment of a new Office of Tax Simplification to examine the existing tax system and make proposals for simplification.

Fairness, Adam Smith’s fourth principle, is as relevant today as it ever was, and is at the root of the anger against the abolition of the 10p rate. It also underpins my pledge to raise the inheritance tax threshold to £1 million, restoring it to a tax on the very wealthy and not on millions of ordinary families. And it was also behind our proposals to levy a simple flat-rate levy on non-domiciles in return for certainty over their status for a Parliament.

The final principle that has been sorely lacking over the last 11 years is a long-term strategy to reduce the overall level of tax. In a fiercely competitive global economy, taxes should be lower. So as Chancellor I will approach each Budget looking to see if we can reduce taxes as well as reform them.

Yet as well as record levels of tax, we currently have the largest budget deficit in the developed world. The way out of this fiscal mess is to share the proceeds of economic growth so that, over an economic cycle, government grows more slowly than the economy does. Over time this will reduce the share of national income taken by the state and provide a stable platform for a sustainable reduction in tax.