The PM has put his gun sights directly on London

This was the payback Budget: the wealthy of London, or at least its bankers, had caused the economic crisis, and now they would have to pay for it through their pockets. It is inevitable that as the engine room of the British economy, London would be profoundly affected by the pre-Budget report.

Being at the forefront of the financial collapse that caused the crisis, it was also inevitable that London would be more affected by this de facto Budget than other parts of the economy. But this goes further than that: it puts its gun sites directly on our buzzing capital.

Short of introducing a London banker tax, this is as close a direct hit that the Chancellor could get on those who brought the country to its knees. It is overall an Old Labour redistributive budget, yanking up taxes on the rich to help the poor. But in London this effect is magnified massively: Alistair Darling has done far more to redistribute wealth here than anywhere else. It is redistribution with a capital R.

London has more than its fair share of both rich people and - far less commented on - poor people. The higher you go up the income scale, the more disproportionately they are concentrated in London. While we have one eighth of the population, the latest public figures (for 2005/6) show that we have one quarter of people earning more than £100,000 a year (129,000) and one third of those earning more than £200,000 a year (47,000).

So the Chancellor's various measures to increase taxes on the rich - with different tax hikes hitting those on more than £100,000 a year, more than £140,000 a year and more than £150,000 a year - may be hardly felt at all in many parts of Britain, but in London they affect significant numbers. All those on more than £100,000 a year will be at least £1,000 a year worse off because of the halving of their personal allowances. All those on more than £140,000 a year will be at least £2,000 a year worse off because of the scrapping of their personal allowances. It is almost as though the Budget is the revenge of England on the affluent of Kensington and Chelsea.

But what he takes away with one hand, he gives again with another. At the other end of the scale, those on low incomes in London will benefit from the increases in tax credits. London has four out of the 10 most deprived local authorities in the country, and they will feel keenly the Chancellor's largesse. We have the highest rate of child poverty in the country, and that will be helped by the increase in child benefit. The large numbers of people on housing waiting lists will benefit from the measures to promote social housing, which build on our housing initiatives launched last week.

Nevertheless, many of the Government's acts of largesse will be less felt here than in other parts of the country. Mr Darling poured more money into the state pension but our comparatively youthful population means we benefit less. Around 1.3 million pensioners in London will benefit from the new pension money, the same number as in Scotland, which has a much smaller population.

The Chancellor splashed out to help property owners hit by the empty property tax which the U-turn-prone Government only recently introduced. He introduced a relief for this hated tax, which is causing owners to knock down empty buildings and developers to put construction on hold. But he capped it for properties with rateable value of £15,000, ensuring that fewer properties benefit in London's still expensive property market. The Treasury's own figures show that just 62 per cent of properties in London are affected, compared to 77 per cent in the Labour heartland of the North-East.

There is one measure that particularly helps London more than any other part of Britain - the easing of rules on the taxation of foreign earnings. This tax was driving multinationals to move their headquarters out of the UK, and in particular out of London. It is one issues that business leaders have warned us about time and again, and it is an issue I raised recently in a meeting with the Chancellor and Peter Mandelson, the Business Secretary. So we can be grateful that the Government finally listened, and did its bit to ensure London remains a globally competitive city.

The government has also, mercifully, confirmed its commitment to starting Crossrail on time, and to the Tube upgrades over the coming decade, both massive transport improvements which are essential for London's future.

But there is far more the Government could do. More than anywhere else in the UK, London suffers from our burdensome, complex and aggressive company tax system: we need to ensure our corporate taxes compare favourably to other countries so that multinational corporations decide to invest here, bringing jobs and money. It needs to stop threatening the City with punitive regulation: financial services have been essential for London in the past, and will remain so in the future.

It needs to ensure that London gets a fair deal from public spending. According to our estimates, London currently pays between £8 billion and £18 billion more tax each year than it receives back from London government, a vast tax export of between £1,000 and £2,000 per Londoner each year. As an affluent city, London should help the poorer parts of the country but the high level of tax exports makes it difficult for London to tackle the very real deprivation that exists here, and to enjoy world-class public services that a world-class city should have.

We, too, are doing our bit. The Mayor has already announced a range of measures that will help London in the downturn - from freezing our share of the council tax to last week's package of measures to kick-start the housing market and help Londoners faced with repossession. Over the next few weeks, we will announce a whole series of other measures to help London businesses and Londoners cope - measures to promote London more powerfully around the world, to help vulnerable small businesses, and help those who lose their jobs get back into the labour market.

We don't know how long or deep the downturn will be, but we do know that the recovery will come. All levels of government must ensure we don't indulge in short-term measures that threaten that recovery. We must ensure that when London bounces back, it retains its pole position as the best city in the world to do business.