Mr Osborne fires the gun for the 2015 election

All the Chancellor’s initiatives contained an implied challenge to Ed Miliband

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That the Chancellor was having to stand up in the Commons and present a new, cuts-heavy Spending Review was itself a defeat – as his shadow, Ed Balls, might have underlined more forcefully in his response. George Osborne’s original plan had been for the deficit to be eliminated by 2015, which would have considerably altered the tenor of what he had to say, even obviated the need for a 2015-16 review at all.

Despite the unsatisfactory backdrop, however, Mr Osborne seemed yesterday to have an extra little spring in his step and an extra note of assurance in his voice. As well he might. Not only can he now claim to see tentative signs of economic recovery, but he faced a front bench of Labour luminaries who have spent the past few months inching ever closer to an austerity agenda not so very different from his own.

There was, as always, some sleight of hand in Mr Osborne’s presentation of the figures, and a worrying sense not only that he rather enjoys wielding the knife, but that he regards cuts to public spending as good in themselves. A refinement yesterday was the distinction he drew consistently between current and capital expenditure. This was welcome in so far as it suggested an acceptance that investment in jobs, infrastructure and housing was beneficial. On the downside, though, this capital spending – whose use is to be spelt out in more detail today – seemed to be offered by way of compensation for swingeing reductions elsewhere.

There is no doubt that there was substantial fat to be trimmed from government when the Coalition took over, but there comes a point where cuts can be counterproductive (in actually reducing efficiency), or deceptive (in that spending tends to migrate elsewhere). Many council-tax payers, for instance, might dispute the idea that the cumulative slashing of the Local Government and Communities budget has left services unharmed.

It is also possible that specific moves designed to save money could actually rebound. A small case in point might be the threat to dock benefits from jobseekers who do not speak, or agree to learn, English. This might be a popular move, but satisfying the demand for English lessons is likely to cost money – and it is not those without a job who will be paying.

The Chancellor’s more chipper mood came across in other ways. One was a new readiness to challenge some very entrenched interests. His announcement that automatic salary increments are to be abolished for civil servants, and progressively for the public sector generally, is bound to encounter fierce hostility. Similarly his intention to amalgamate what he called “a significant chunk” of health and social care budgets so that people no longer “fall between the cracks”. Desirable – even essential – though such reform is, it will be resisted by hierarchies on either side. It might also be interpreted as eroding Mr Osborne’s own guarantee not to touch spending on the NHS. 

Neither of these measures can be seen in isolation, however. Which suggests another reason for the Chancellor’s good cheer. This Spending Review related to 2015-16 – in other words to the next electoral season and beyond. And each successive initiative contained an implied challenge to Ed Miliband. Would he retain Mr Osborne’s cash-cap on welfare spending? Would he reintroduce automatic salary increments for civil servants – and preserve them for the rest of the public sector? Would he, at a micro-level, drop the English lessons? 

These are some of the traps, big and small, that the acutely political Mr Osborne has set for Labour. At least Messrs Miliband and Balls now know some of what they will be up against. The campaign for 2015 starts here.

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