George Osborne
George Osborne visiting the Crossrail construction project at Tottenham Court Road in London, 15 March 2016Getty Images

The British Chancellor of the Exchequer George Osborne is in trouble. Deep trouble. His strategy has finally been exposed for what it is. The contradiction between the political aims of Prime Minister David Cameron and Osborne has now surfaced in full public view.

And the man who has played what one might call a "walk off" part in this drama is Iain Duncan Smith. Until his resignation last week, the Government's work and pensions secretary was at the coal face of "welfare reform".

The man who has played no part in the drama, but whose attitude to tax reform ought to have been studied more closely, is the veteran Conservative Ken Clarke, who was a largely successful Conservative chancellor between 1993 and 1997.

One of the besetting sins of successive chancellors of both major British political parties is that they want to go down in history as "reformers" who simplify the tax system.

Unfortunately it never works out that way in practice. Almost every attempt to simplify the tax system ends up making it more complicated. Guides to the system get thicker and thicker, causing considerable attrition in the Scandinavian forests from which so much of our paper originates.

Ken Clarke is a very straightforward character, and freely admitted early in his chancellorship that he had lost interest in tax reform "once I discovered there were losers as well as winners".

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Although there are all manner of political shenanigans behind the bust-up between Cameron and Osborne on the one hand, and Duncan Smith on the other, at the heart of the crisis lies a failure to learn from Clarke's simple dictum. There were bound to be losers in welfare reform, and it was Duncan Smith's growing awareness of this that lay behind his battle with the Treasury.

Duncan Smith has been blamed by his opponents for a volte-face on a policy that was supposed to be his, but we have the testimony of Nick Clegg, who was deputy prime minister in the 2010 - 2015 Conservative - Liberal Coalition Government. Apparently Duncan Smith has long harboured doubts about the bias of both Cameron and Osborne in favour of policies that benefit the well-off at the expense of the poor.

Here we return to the contradiction between the aims of Cameron and Osborne. Cameron professes to be a One Nation Conservative, in the tradition of Harold Macmillan, prime minister in the late 1950s and early 1960s, and Ian Gilmour, who was sacked from Mrs Thatcher's cabinet in 1981 for, effectively, being too much of a One Nation Conservative.

"One Nation" is a kind of code for "caring Conservatives" who worry about the impact of policies such as tax reform on the poor. What has brought things to a head in Cameron's cabinet is the revelation that Osborne, in his Budget last week, was planning simultaneously to cut taxes for the better off at the expense of the disabled, whose allowances were to be reduced.

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Now, members of Parliament, by definition represent constituencies, and a growing number of Conservative MPs last week were rightly up in arms about the impact of Osborne's Budget on those of their constituents who are disabled.

The plot thickens. Suddenly none other than Ken Clarke himself appeared on the Today programme this morning (22 March) and rallied to the support of our beleaguered chancellor.

"The actual underlying income of disabled people nowadays is quite rightly vastly higher than it was in my day as chancellor. We've reached the astonishing position where we are paying out more to disabled people by benefit than the entire budget of the Ministry of Defence. But you see it is very difficult to change, they should have worked out how they were going to explain it, how they were going to sell it," said Clarke.

To my mind this sudden, and somewhat eccentric, contribution to the fiasco can only be explained by the existence of some sort of Conservative chancellors trade union.

The assault on the disabled is hardly consistent with One Nation Conservatism (which is just another way of describing compassionate Conservatism). But it fits all too well with Osborne's ambition to shrink the size of the state at almost any price. It is also the callousness of a Budget which combined such as assault on the unfortunate with goodies for the fortunate that finally undid Osborne's reputation.