Tories urging rethink on tax system

He will accuse the Government of having a tax policy driven by short-term political goals rather than long-term economic consequences.

In a speech, he will also pile further pressure on embattled Chancellor Alistair Darling, claiming he will "never recover a reputation for competence".

The Government's "clumsy" attempts to introduce a levy on non-domiciles and "ill-judged" changes to capital gains tax have sent out a "toxic mix of complexity, uncertainty and negative symbols".

In his speech at the Policy Exchange think tank, Mr Osborne will say reform of the tax system is needed to bring it up to date to meet the challenges of globalisation and climate change.

"We face mobile flows of capital and labour, when the building blocks of our tax systems were largely designed for a much more closed economy in which only tradable goods crossed borders.

"We face the challenge of preventing catastrophic climate change, when the vast majority of our taxes are levied on productive activities with no regard to how polluting they are.

"And we face a crisis of public trust in taxation that is summed up by that new addition to the political lexicon: stealth taxes."

A panel of experts, led by former Chancellor Lord Howe of Aberavon, has been asked by Mr Osborne to examine a series of reforms to tax laws.

The proposals include a new Office of Tax Simplification, which Mr Osborne claims will "create a simple and transparent" system.