Taxes are going up. Hurrah!

In the week of the Budget let us toast the successful introduction of a new tax. London's congestion charge has been a triumph, making travel in the capital almost tolerable for the first time in decades. I confidently predict it will be coming to a city near you before very long.

The introduction of the charge shows what can happen when a political leader is bold. In the build-up Ken Livingstone, the Mayor of London, was slaughtered, with newspapers and political opponents predicting mayhem, proclaiming that nothing could work in a city as awkward and densely populated as London. They have all had to accept that there has been no mayhem. But a lot of these seething opponents are doing something more profound than that. They are beginning to wonder whether such a transparent tax might be a rather good way of controlling traffic and, at the same time, raising money for public transport. The policy has changed their hostile attitude towards "tax and spend", with some of them accepting that taxes and the subsequent public spending can improve their quality of life.

A New Labour mayor would not have introduced a congestion charge in such an open way. There would have been a review, a review of the review, and after four or five years an announcement of an experimental scheme on one high road from 4am to 5am – an experiment hailed as a radical and historic moment for London. No doubt a New Labour mayor would have got there in the end, but it would have taken a long time, implemented only when everyone was screaming for it.

Similarly, the New Labour Government has made several radical innovations, arguably more so than any of its predecessors, from the minimum wage to the tax credits that are part of a coherent set of policies aimed at helping the low paid. But I do not hear voters responding to these policies as some have done to the congestion charge. I do not hear them say that they used to be Thatcherite and are now converted to a new form of progressive politics as a result of New Labour. This is partly because Tony Blair tends to crusade most visibly over causes that involve him "boldly" taking on weaker opponents with the backing of powerful right-wing newspapers. The war against Iraq is the latest example. But we have also had an ill-defined "welfare revolution", his equally vague plans for the private sector to become more involved in the public sector, and of course his campaign to prevent Livingstone from becoming Labour's candidate in the mayoral contest. These campaigns no doubt convince some Conservatives to vote for Blair because they are reassured he has the same instincts as them. It does not persuade right-wingers to vote for him on the grounds that he has converted them to a more progressive political agenda.

Margaret Thatcher managed to convince previous Labour voters to become "Thatcherites". Mr Livingstone has swayed a few Thatcherites to reflect on the progressive benefits of a new tax. The Government tends to carry out its more liberal and progressive policies on the quiet, almost in the hope that people do not notice.

This week Blair has the opportunity to start reclaiming a progressive agenda. Taxes are going up – the first time this has happened openly since he came to power in 1997 – to pay for improvements in the NHS. The context is similar to the build-up to the congestion charge. Everywhere in the media there are confident predictions that the increases will be a waste of money, that they cannot make a difference. (Although I note that the Conservatives will wisely make no commitment this week to reverse the tax increases.)

I am equally confident that the increased cash will bring about tangible improvements. After all, investing for a sustained period of time in the public services has never been tried before in Britain. A masochist should write a book called the History Of Public Spending, 1970-2001. A few fellow masochists might even read it (although it would not win my award for the world's most boring title. That goes to a book I discovered recently called Lead Piping in the 1970s).

For three decades the approach of different governments to public spending has been disastrously inept. They have imposed cuts at the wrong time in the wrong areas and increased expenditure haphazardly and fruitlessly: subsidies on the price of bread and inefficient industries in the 1970s, huge social security bills in the 1980s. This has created the irrational but widespread perception that all public spending increases are a waste, and that there is a painless alternative, that more doctors and nurses can be trained for nothing.

This week's tax increases are being raised for improvements to the public services, rather than to help a government get out of a hole. This is so unusual the Government should heed the advice of the innovative Fabian Society and follow up the increases with a letter to every household explaining the link between taxes and improvements in their lives.

Of course, at such a pivotal moment the Government could mess it all up by imposing ill-thought-through reforms. The current and serious divide over the proposed Foundation Hospitals is not between modernising New Labourites and narrow-minded old Labour. It is between a coherent and an incoherent policy. If Foundation Hospitals are allowed to borrow on the open market they will only be able to repay the cash by expanding their private treatments. Such an expansion of the private sector would take place at precisely the moment when ministers are trying to persuade doctors to commit themselves to the NHS. That is an incoherent policy, as well as one that would result in the well-off paying for quick, classy treatments with the rest having to slum it. There are many more coherent ways of modernising the NHS: breaking national pay bargaining, rewarding far more openly the most innovative and efficient hospitals and GPs. In some ways the increased investment will change the culture in itself. Ideally, there will come a time when GPs compete for patients, rather than patients queuing up to see any doctor – however incompetent – who is available. It is better to get the modernising policies right, before rushing boldly forward with the wrong policies.

Still, at a time when the Government is making right-wing Eurosceptic Atlanticists purr over the war, let us raise a toast to another progressive initiative. After the congestion charge, three cheers for this week's tax increases.