Allister Heath: Clear blue water opens up between Osborne and Labour on economy

The second big difference is that Osborne has now made it clear that he doesn’t want to hike taxes any more, with the exception of the tightening of various loopholes – he wants to balance the budget by reducing spending. In other words, he has become far more radical in his desire to shrink the state. It should be remembered that he started off in power in 2010 by substantially upping taxation and only started cutting spending in real terms later on. It is good to know that Osborne Mark II would be far sounder.

This stands in huge contrast to Miliband’s Labour party, which is obsessed with increasing taxation on income, property, the financial system and profits. The difference is not mere rhetoric; while Labour’s tax hikes would not raise much money overall, they would prove hugely damaging to enterprise, incentives and the UK’s overall competitiveness.

That said, Osborne’s plans remain insufficiently detailed, despite his latest pledges. He would freeze working age benefits from April 2016 for two years, saving £3.2bn a year by 2017-18. This represents a further, slight toughening of the current 1pc cap. There will be some exceptions – including disability, carer and maternity pay. The benefit cap will be reduced to £23,000 from £26,000, a policy which pollsters have shown to be hugely popular. Childless young people would have to work for their benefits, a sensible policy which Osborne somewhat exaggeratedly spun as heralding the complete abolition of long-term youth unemployment.

The Tories claim that since 2007 earnings have grown by 14pc, against 22.4pc for most working age benefits. They predict that the gap will have been eradicated by 2017. While all of these cuts and some of the others announced will help, they are just a small part of what will be needed if the deficit is to be eradicated, especially given the worsening outlook for the public finances.

A major issue is that pensioners will remain entirely immune from Tory cuts, even though they are the recipients of a huge chunk of overall public spending. This makes sense politically in the short-term for the Tories but could prove dangerous longer-term as it will be seen by many younger voters as unfair. Far more details are needed on how exactly the Tories would slash overall public spending in the years ahead.

The third big difference is that Osborne evidently understands the market economy far better than Miliband. Sure, the Chancellor occasionally relapsed into business-bashing in Birmingham, as with his attack on tech firms that have the temerity to follow current tax law and his tired re-embrace of ring-fencing, a policy based on a misreading of the crisis of 2008, but when compared to Miliband’s damaging dislike of capitalism, these are relatively trivial caveats.

As the Chancellor rightly argued, we live in an era where a single app can disrupt an entire industry overnight. The digital world is ushering in changes that are as big as those spawned by the Industrial Revolution, something the Chancellor finds “extraordinarily exciting”, arguing that “Conservatives applaud the power it places in the hands of citizens”. He also understands that wealth needs to be created before it can be spent, either by the private sector or by the state.

Not all of Osborne’s policies are right. While many will love his first-time buyer discounts, they aren’t the solution. We need more private sector house-building; the Coalition’s reforms haven’t gone far enough. The Chancellor’s policy to reboot the North of England is too statist, too dirigiste. Osborne is right to bemoan nimbyism but it was his party that blocked airport expansion. He correctly wants to boost apprenticeships but should beware pushing the policy too far and diluting quality. It isn’t quite true that the deficit is approaching half what it was when the Tories came to office, as Osborne claimed, at least not on a rolling basis.

But the real point is that the gulf between Tory and Labour economic and tax policies is now at its widest since John Major and Neil Kinnock’s epic struggle in 1992. What voters will make of this remains to be seen.

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