Hugo Young: At last Gordon Brown can tell the truth about tax

Next week Gordon Brown will deliver his first honest Labour Budget. It marks a moment in the evolution of this government. On the brink of its fifth anniversary, the Blair administration is becoming more like what its most active supporters want it to be, a recognisably Labour entity. But it may be revealing something else. For five years there's been a paradox at the heart of New Labour, which the Budget looks as though it will resolve. Nobody has personified this more than the chancellor, an almost freakish combination of total power and total fear: the fear, above all, of total honesty.

On the surface, the government is very confident. It glories in its electoral victories. It bestrides the country. Its worst habit, sometimes noted in this space, is centralised authoritarianism, along with a scandalous disregard for basic civil liberties. But there is no rival in sight, so this trait is not very surprising. The orthodoxy of the day is Blairite orthodoxy, to which even the Tories are beginning to cleave. Labour speaks from the massively broad central ground on which just about every public and private body in the country has been compelled to park.

The chief architect of this ground has been Gordon Brown. Blair was as much the mapmaker of the territory, but Brown is the detailed builder on it. The central priorities of every domestic department except the Home Office are ruled from the Treasury. Nothing escapes Brown's eye: its lateral vigilance has no parallel in the record of any modern chan cellor. Whether announcing policy, or delivering lectures, or coolly flicking interviewers aside, Brown seems to be delivering the punch of the ultimate heavyweight.

Yet, at a different level, the picture is misleading. Still peeking through the attitudes of Labour politicians high and low are glimpses of doubt about their right to be where they are. One of Blair's lines of attack in the House of Commons continues to be, from time to time, derision of the Tories for the belief, in their heart of hearts, that Labour are usurpers. The fretful, nervous soul of Labour as it was in the 70s, the 80s and the 90s continues to inject an element of paranoia into even the highest Labour heads: a sense that they may only be there on licence, that the Tories have historical inevitability up their sleeve, that the British powers-that-be are waiting to kick Labour out.

To outsiders this looks an incredible proposition, absurdly overrating the power, indeed the existence, of the old Tory establishment. It may reasonably have dictated Blair's early strategies to gain acceptance by the business community. Part of the necessary newness of Labour required it to prove it had moved beyond its old ghettoes. It had to avoid scaring middle-minded voters off. But well before last year's election, the need for such alarmist manoeuvring had surely passed.

For the chancellor, though, the pursuit of the middle way was more than political. Credibility with business, and exaltation of the wealth-creating agenda, were and are central to his economic programme. This didn't exclude tax rises, but entirely ruled out talking about them. Stealth taxation was a Tory line but a Brown invention. For three years, until the election campaign hove into view, social justice - let alone equality - was a term used sparingly, if at all. To that extent, dishonesty infused both Brown's apparent objectives and his defence of what he was doing. He could not come up front as a real Labour politician.

The 2002 Budget will change that. A balancing- act has been foreshadowed, with the announcement of various titbits to keep entrepreneurs happy. But Brown's theme will be tax rises to finance public services. His uncompromising defence of the NHS last month was a classic speech out of the oldest Labour heart. He and Mr Blair - there's no difference between them on this - evidently feel free to pursue with candour and clarity what they've spent five years blurring: the need for higher taxes to finance the better public services they've always thought they were in politics to defend. The paradox, whereby great strength kept being undermined by chronic, defensive self-doubt, is on the verge of being liquidated.

Gordon Brown's personal complexities are unlikely to be shifted in the same way. He has jointly led the desertion of old Labour language. This was just as much a part of his political seriousness as is his unrelenting attention to the substance of policy. His faculty of calculation has many strands, which sometimes belie his reputation as the commanding Labour intellectual who knows exactly where the party should be going.

He seldom, for example, decides anything fast. His intimates speak of an almost endless capacity to examine the politics of the next 10 moves he might think of making. This is one of the clearest differences between him and Blair, a leader who trusts his instincts, as well as his powers of persuasion, with bravura certainty. It is Brown not Blair who pores over opinion polls and focus groups, and spends hours talking through the politics of economics with his little band of intellectual servants. He can agonise until the end of the eleventh hour, deciding what to do.

This is what he brings to the discussion of the euro, in which his role has often been misrepresented. It's true that he's a doubter about a referendum in this parliament. It's true that he understands better than anyone the risks that a miscalibrated entry would impose on the economy that he has spent five years attentively nursing. What's probably truer, I was told the other day by an adviser who sees him often, is that these imponderables raise for him an awful crisis of decision. They don't predetermine him against the euro, because he wants Britain to go in some day. But they bring out all the characteristics of a politician unusually frightened of making a big mistake.

That's what drove his and Blair's aversion to telling the truth about tax. They thought they might be terminally punished, even in 2001, if they began an honest dialogue with the British people about the need to pay for the services everybody wants. This led to the ridiculous manifesto commitment not to raise income tax rates, a self-tailored straitjacket that will confine the chancellor's reach next week. Though national insurance rises may fill the gap, they're an unsatisfactory substitute for the straight progressive taxation that the new honesty suggests we're surely ready for.

The irony here is not insubstantial. The people Labour now most fear offending with higher taxes are their own heartland voters, the C2s and the Ds, who are always worst hit by indirect tax rises. So raising tax will carry the usual political penalty, as well as the wider reputational cost Blair and Brown have spent five years contriving deviously to avoid. But now they can come out openly to defend the hardest part of the progressive consensus they've always believed in. The argument will be traditional. Given five years' avoidance, it will need to be made with no more ambiguity.