Eat your heart out Geoffrey Howe. Take a back seat Norman Lamont. Austerity has a new champion and his name is George Osborne. Today's budget was billed as tough but that failed to do justice to a package that made Sir Stafford Cripps look like a soft touch. Not content with the £73bn of tax increases and spending cuts inherited from Alistair Darling, Osborne added an extra £40bn of tightening of his own. Brutal stuff, but if things go according to plan the bulk of Britain's record peacetime deficit will have disappeared by the end of this parliament, the financial markets will give Mr Masochism a big thumbs up, a re-energised private sector will take the place of a shrunken public sector to be the engine of growth, the north will grow as rapidly as the south, and the coalition government will reap a big political dividend come the next election. That all rests, though, on a very big "if": the ability of the enfeebled and unbalanced UK economy to withstand these draconian measures without slipping back into recession. Should that be the case the coalition could be dead in the water within 18 months.

But let's start with some plus points. For a chancellor of only six weeks, Osborne delivered his budget like a grizzled veteran: he was clear, crisp and eschewed the irritating gimmicks that Gordon Brown used to favour. Provided you accept the premises on which the government's economic strategy is built, the package made eminent good sense.

What's more, there was evidence that lessons had been learned from Conservative mistakes of the 1980s and 1990s, both in the attempt to shield the poorest from the full impact of the measures – at least temporarily – and from the acceptance that indiscriminately cutting capital spending is short-termism of the most futile sort. There were plenty of regressive measures in the budget – the VAT increase, the three-year freeze on child benefit, the indexing of benefits to consumer prices rather than retail prices – but this was not a crude "soak the poor" affair.

The £2bn increase in child tax credit, bringing forward the restoration of the earnings link with the state pension, and the £1,000 increase in the personal allowance all helped to soften the blow from the budget. Taking all the tax and benefit measures into account, everybody loses but the biggest losers in the short-term were those households with incomes of more than £50,000 – the richest 10%. The increases in the child element of the child tax credit lasts for two years only: from 2012-13 onwards this budget looks a whole lot less progressive.

The sense that the budget was less fair than it looked was underlined by the soft-touch approach to the City. The increase in capital gains tax was smaller than expected and the £2bn bank levy was hardly suitable punishment given the role of the financial sector in Britain's most grievous post-war recession. Campaigners for a so-called Robin Hood tax said Osborne could have raised £20bn through a financial transaction tax – enough to pay for the £12bn he will raise from pushing up VAT to 20% with plenty to spare. The next chapter in the austerity saga will be written over the next few months and published in late October in the form of a comprehensive spending review that will take the axe to departmental budgets in the three years from 2011-12.

These cuts are likely to fall disproportionately on the poor families that rely most on public services.

But unlike Howe in 1981, Osborne was able to make a decent fist of portraying his budget as an equitable sharing of unavoidable pain. Indeed, his summing up – "We've had to relearn the virtue of financial prudence. But in doing so we have ensured that the burden is fairly shared" – was positively Crippsian in its mixture of moral repugnance for debt and its 1940s echo of the whole nation being in this together.

Interestingly, both Cripps and Osborne had the same macro-economic objective for their budgets. They wanted Britain's resources to be biased towards investment and exports rather than consumption; in the 1940s the squeeze came in the form of a continuation of wartime rationing; over the next few years it will come largely through a shrinking of the state.

The rebalancing was easier to finesse in the 1940s than it is now. At that time Britain was the second biggest manufacturing nation in the world, the US had fully recovered from the Depression, the global economy was poised for a reconstruction boom, and many rival powers – Germany, France, Italy, Japan – had seen their industries ravaged by the war. In 2010, Britain's share of world manufacturing has shrivelled, the recovery in the US is petering out and the eurozone – the destination for more than 50% of UK visible exports – is crisis-ridden and economically stagnant.

As such, this budget is a colossal gamble. There was little evidence before the election that Darling's fiscal plans – themselves draconian – were insufficient to keep the febrile financial markets sweet. The pound and gilts strengthened during the election campaign, even though the possibility of a hung parliament was ever-present. The international backdrop is less favourable now than it was two months ago, both because growth prospects are weaker and because the deficit-cutting fraternity have the upper hand in the G20. Far from being a terrible evil, government spending spared Britain from an even worse recession in 2008 and 2009, and Osborne's doctrinaire approach to deficit cutting risks not just slower growth and higher unemployment, but a fresh leg to the downturn.

Not all the lessons of the 1980s have been learned, it seems.