A week before George Osborne unveiled his first Budget, the Office for Budget Responsibility (OBR) issued a report suggesting that the policy of his predecessor, Alistair Darling, would have reduced the bulk of the deficit by 2014-2015, without the need for cuts on the scale the new Chancellor is proposing. The OBR has since revised growth forecasts downwards and, as Professor David Blanchflower argues on page 16, the British economy is likely to be on the verge of a catastrophic double-dip recession.

As Mehdi Hasan points out in his column on page 14, the Conservatives are taking a "huge political and economic gamble" with this austerity Budget, which announced the most severe fiscal tightening since the Second World War. It is one that reawakens memories of the worst depredations of Thatcherism and risks undoing five years of hard work by Mr Osborne and David Cameron to make their party electable by "decontaminating" the Tory "brand".

But what of the Liberal Democrat brand? Mr Osborne declared in the House of Commons, the Conservative-Liberal Democrat coalition is a "progressive alliance governing in the national interest". In describing the coalition this way, the Chancellor drew attention to the growing difficulties the Deputy Prime Minister, Nick Clegg, faces in his own party.

With admirable collegiality, Mr Osborne sought to offer Mr Clegg protection on his left flank from a membership (not to mention a number of prominent Lib Dem MPs, Charles Kennedy and Menzies Campbell among them) that harbours deep misgivings about what the party leader has persuaded them to sign up to. Mr Clegg, in emails sent to party members immediately before and after the Budget, argued that the Chancellor's economic package had "the clear stamp of Liberal Democrat values running through it" and had "fairness" at its heart. It is certainly the case that the Budget contains some measures that meet the test of fairness, and we welcome among them the bank levy and the increase in capital gains tax (CGT).

However, neither of these initiatives goes far enough - the Lib Dems' coalition partners appear to have succeeded in watering down the bank levy, which compares unfavourably with the one proposed by President Obama in the United States (and about which the City of London seems relatively sanguine), and it is disappointing that CGT was fixed at 28 per cent, rather than being brought into line with higher rates of income tax. Nor is it easy to square a putative commitment to fairness with the attacks on asset-based welfare announced in the Budget: the decision to scrap the extension of the Saving Gateway follows the abolition of the Child Trust Fund, which was virtually the first act of this government in office. Meanwhile, spending cuts will hit the poorest households hardest, as will a freeze on child benefit and a reduction
in housing benefit.

But what Mr Clegg will have the greatest difficulty explaining to his party is the rise in VAT to 20 per cent, a policy against which the Lib Dems campaigned hard in opposition and which their deputy leader, Simon Hughes, described, a week before the Budget, as "not the right tax to change". Mr Hughes was right to be concerned: VAT is a regressive tax that affects the worst-off disproportionately. And, despite Mr Clegg's claims, the decision to raise the income-tax threshold will not mitigate the worst effects of the increase in VAT on the poorest 10 per cent in our society, who are not in work.

It is beginning to dawn on some Liberal Democrats that, in the words of the vice-chair of the party's policy committee, Richard Grayson, they are a "centre-left party . . . being led from the centre right". Led, that is to say, by a coterie of Orange Book, classical liberals whose enthusiasm for "savage" cuts in public spending long pre-dates the opening of the government's books to scrutiny by the coalition. The Business Secretary, Vince Cable, has claimed that it was a meeting with officials from the Bank of England shortly after he took office that convinced him of the need for drastic fiscal retrenchment. But this narrative, echoed by Mr Clegg in his emails, is highly misleading. The Lib Dem leadership had already signed up to the Tory timetable for austerity measures as part of the coalition agreement, and in fact was pushing for bigger public spending cuts as long ago as the 2008 party conference.

If the Lib Dems' historic decision to join and influence a coalition government with the Conservatives is to be vindicated, they must ensure that fiscal policy is progressive in deed and not just in word. This Budget suggests they are still some way from achieving that goal.