Time for some quiet reflection on the budget.

Let's consider the related issues of domicile, private equity and capital gains tax. Alastair Darling had to do something on these issues. Earlier this year we had the farcical situation of some in the private equity industry saying they were paying tax at lower rates than their cleaners. There were three reasons:

1) The income of the partners in many private equity firms is taxed as capital gains under an agreement between the Treasury and the British Venture Capital Association - an agreement that does not even have the force of law. But it is income. Nothing else. And to tackle the issue the Chancellor had to say that was how it would be taxed as income in future. But he did not. He's left this abuse in place.

2) Capital gains on business assets could be at rates as low as 10% before today - just one quarter of the top rate of income tax. You can see how this massively advantaged partners in private equity firms, and massively increased the value of their earnings. That's all they paid on most of their income, even if they were domiciled in the UK. But there was good reason for the 10% rate. It was low to reflect the fact that many real entrepreneurs, as opposed to the financial manipulators of private equity, work for many years to create the value they realise on sale of their small businesses. The low rate reflected that fact. But the Chancellor is now going to penalise them with an 18% tax rate on all capital gains (which will, incidentally be far too low when applied to non-business assets - leading to all sorts of abuse including the provision of massive incentive for any income to be recategorised as gains - something accountants were immensely good at many years ago before the income tax and capital gains tax rates were aligned for non business assets held in the short term). This will discourage small business and massively encourage financial speculation, which adds no benefit to this country at all. And it will leave private equity partners still paying tax at less than half the rate they should be paying under income tax rules.

3) The domicile rule has been exploited by many in the private equity business. This is easy. First of all, and contrary to the image they would like to present of adding value to the UK economy, most private equity activity is actually registered offshore. That means that anyone who is non-domiciled and an owner of a 'carried interest' or investment in such a fund will immediately have an offshore asset as a result. So any capital gain they make on it will be outside the UK. That means the remittance rule applies immediately, at a mere cost of £30,000 a year. So any capital gains tax they pay on this will remain entirely voluntary, dependent entirely upon whether they decide to remit funds to the UK or not. So those private equity partners who are non-domiciled (and the Observer thinks that's 80% of them) will just laugh at the increase in capital gains tax that the Chancellor has announced to tackle abuse in this sector - they won't be paying it anyway.

So, how has Alastair Darling faired? Appallingly. Far from tackling abuse he has encouraged it by:

a) Confirming that tax dodging by the private equity sector is still OK;

b) Confirming that the domicile rule survives, even though I have shown that it is illegal under the UK's Race Relations Act;

c) Has confirmed that it is OK for the very wealthy to, as Lord Gill said to "not so much [be] taxed by law as untaxed by agreement." I have suggested this is illegal, and think this true and seriously hope it is challenged by EU member states.

d) Has harmed the UK small business sector to spite, but has not harmed the private equity sector. The result will be untold cost to real enterprise in this country by increasing the capital gains small businesses pay;

e) Has created untold opportunities for tax abuse by more than halving the rate of capital gains tax, which will not doubt be a cause for widespread tax celebration up and down the land amongst the UK's tax fiddling accountants;

f) Has shown himself politically inept by closing a five year review on domicile by simply copying a Tory conference announcement from a week ago: no other interpretation is possible;

g) Has let the private equity industry carry on unhindered in harming the UK economy and the job security and prospects of those who work in it;

h) Has failed to raise £4.3 billion to tackle child poverty - which he could have done, meaning he's effectively giving a continuing subsidy of over £3 billion to the very rich at cost to the poorest children in this country;

i) Has ignored calls from the CBI, FT and others to end tax abuse.

How many points does he get for that? Precisely none.

This is a disastrous showing from a man who needs to tackle tax abuse if the numbers are going to stack over the next few years. And it does not reflect too well on his boss, come to that.