Editorial: Mr Osborne draws the battle lines over welfare

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The Chancellor most certainly came out fighting. Within 10 minutes of beginning his speech to the Conservative Party conference yesterday, George Osborne had represented his Government's embattled fiscal strategy as a binding promise to the electorate, reiterated his oft-derided claim that "we are all in it together", and reprised his defence of the controversial decision to axe the 50p tax rate.

The headline message was clear: like Mrs Thatcher, Mr Osborne's Treasury is "not for turning". But his oratory on fairness and aspiration – taken together with the obligatory swipe at the "blissful irrelevance of opposition" – were also a well-received tilt at a Labour Party buoyed by last week's barnstorming conference speech from Ed Miliband.

If the Chancellor was overtly taking the fight to the Opposition, however, hardly less explicit was his drawing of the battle lines with his Liberal Democrat coalition partners.

Of the £16bn of further cuts needed in this parliament, £10bn is to come from the welfare budget. Inflationary benefits rises, housing benefit for young people leaving home with no job, and unquestioned state support for ever-larger families are all on the table, the Chancellor hinted. Such an undertaking will prove popular with those convinced by Mr Osborne's vivid portrayals of the industrious leaving for work each morning while their neighbours "sleep off a life on benefits". It is a compelling image, but one that is too partisan and too simplistic to sit comfortably alongside Liberal Democrat Treasury minister Danny Alexander's own conference pledge not to allow "the books to be balanced in a way that hits the poorest hardest".

More combative still, Mr Osborne also categorically ruled out the "mansion tax" that has become a totemic Liberal Democrat policy – skewering it as a "home tax" that would be anathema to "the party of home-ownership".

Nor did he offer any concessions in return. There were some general noises about those with the most contributing the most, and a lukewarm avowal that, "if" there are ways to raise revenues from the well-off without damaging the economy, then the Government will look for them. Even allowing for the fact that the Chancellor was addressing the Tory faithful, the statement was strikingly unequivocal.

A party conference is no place for detailed policy announcements and, as befits his audience, Mr Osborne talked more politics than practicalities. There was, though, the welcome commitment of £1bn to scientific research. And there was also the launch of a scheme under which smaller companies might offer new staff an equity stake in return for the surrender of unfair dismissal rights, with a waiver of capital gains tax to sweeten the deal.

Here, at least, there is Coalition agreement. But the Chancellor's choosing to announce the proposal – and to couch it in terms of the controversial Beecroft reforms largely resisted by the Liberal Democrat Business Secretary – speaks volumes. With the Tory leadership under fire over its supposed capitulation to the Liberal Democrats, the resurrection of Beecroft at the conference looks as much like an attempt to snatch victory from the jaws of defeat as an effort to push unpopular reforms through the back door.

Coalition has such horse-trading at its very heart, of course. But, for all the carping from the Tory right, the Liberal Democrats have – painfully – lost more than they have won. If yesterday was the Chancellor's opening position on the £10bn more to come from welfare, the biggest battle of all is still to come.

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