In July, George Osborne came to the House of Commons to play Scrooge. On Wednesday, in chilly November, the chancellor used his return appearance to play Santa.

The pre-show buildup had suggested the opposite. Austerity Osborne would unveil a spending review to make the eyes water, cutting and slashing at the state until it was left in bloody ribbons. In the event, he came bearing gifts, all but ho-ho-hoing as he told recipients of tax credits their payments would be safe (for now) or delivered similarly glad tidings to the nation’s police forces, assuring them their jobs would be safe after all.



There were stocking-fillers for almost everyone, cash doled out for sport and the arts, for Britain’s diplomats and for infant schoolchildren whose lunches would still be free. And somehow all this would be done while still paying down the deficit, still steering Britain into the black by 2019-20.



How could such a feat be possible? How could a chancellor display all the beneficence of Santa yet deliver the fiscal rectitude of Scrooge?



The answer rested on a gift delivered to Osborne by those helpful elves at the Office for Budget Responsibility. They were kind enough to tell him that the public finances had improved – even, it seems, since July – to the tune of £27bn spread over the next five years. The OBR had forecast healthy growth for the coming period, predicting the economy would expand at a steady clip of 2.4% or so every year from now till 2020. And increased growth means increased tax receipts. With more money expected to come in, Osborne had permission to send more out.



Only a churl would point out that this is a plan built on thin air. That this is Enron economics, in which being told that you’ll get more money is the cue to start spending it right away. It’s not even as if the chancellor had found £27bn down the back of the sofa. He had found it down the back of a hypothetical, future sofa.



To put it more charitably, his generosity was predicated on a series of rather heroic assumptions. Year after year, whether on budget day or when delivering an autumn statement, chancellors announce that the economy is set to blossom like a cherry tree in spring – only for a “revised forecast” to appear on the inside pages a few months later. So the chancellor has rested the next five years of Britain’s public spending on a number generated by an OBR whose record in the predictions business is less than stellar. Not that anybody else’s is much better. As the US economic sage JK Galbraith famously put it: “The only function of economic forecasting is to make astrology look respectable.”



In normal times, you might expect Osborne to take some heat for such a move. If he was not excoriated for his absurd optimism, then surely he would be lampooned for the extravagance of his flip-floppery, performing a rubber-burning, tyre-screeching U-turn on tax credits, saving them so soon after he had solemnly declared that they’d have to go.



But no. Osborne paid no such penalty and he knew he wouldn’t have to. For one thing, just as he felt able to deprive the low-paid of their tax credits in July because he knew he would not have to face the voters till 2020, so he surely calculated that an egregious volte-face on the same issue was possible now because the memory of it will have faded by the next election.



He will also have reasoned that a U-turn, performed cleanly and without ambiguity, can bring credit to its author. Done badly, it can make a politician look weak and rattled, buffeted by events. But, done right, it can be presented as an act of supple pragmatism, putting empathy ahead of dogma. Osborne milked that second option to the full. “I’ve listened to the concerns,” he said. “I hear and understand them.” His message: the George Osborne booed at the Paralympic Games of 2012 was gone, replaced by an iron chancellor with a heart. He was making a virtue of retreat.



It helped that the U-turn was total. There was no nickel-and-diming, no trimming at the edges merely to soften the impact of the tax credit cuts. Had there been, there would still have been voters in pain, ready to confront ministers with their tears on Question Time. Osborne was smart enough to know that if you’re withdrawing, better to withdraw completely.



But Osborne’s calculus also rested on an estimate of the party opposite. He knew he could get away with this move – or almost any other – because of the parlous state of Labour. A potent opposition limits the government’s room for manoeuvre. But today’s Labour is anything but potent. It is introverted, divided and accident-prone, too busy tripping over its own feet to stand in the way of this government.



Proof came with the reply of the shadow chancellor, John McDonnell. Never an easy gig, and made harder by Osborne’s methodical shooting, one by one, of every anticipated Labour fox. But still McDonnell’s performance had his party putting its collective head in its hands. A man already lampooned as an unreconstructed communist, he pulled out the notorious Little Red Book and quoted Mao Zedong. True, McDonnell was trying to fire off an ironic rebuke of Osborne’s cosy ties to Beijing. But such irony does not work in the bearpit of the Commons nor on television – and certainly not when delivered by a man who too many believe might quote the sayings of the Chinese dictator in earnest. Suddenly Osborne was not Santa, but a child at Christmas – handed yet another unexpected gift.



Of course, Scrooge has not been banished. This spending review contained much pain. Those who were set to lose out due to the change in tax credits, will now lose out when universal credit is introduced. There are still to be £12bn of welfare cuts, though much of those remain unspecified. Immediate hurt is to be replaced by the slow-burn variety.



It’s also true that Osborne hopes to outsource the inflicting of that pain to others. His “devolution revolution” has much to admire, but it is also an exercise in blame-shifting. It will fall to local councils to keep cutting cherished services – whether libraries, parks, rubbish collection or help for the disabled – while also raising more revenue. They will have to levy a 2% tax for adult social care and, predicts the OBR, hit residents with £2.2bn more in council tax bills by the end of this parliament. Osborne expects those residents to blame the local town hall rather than him.



Running through this calculation and indeed the whole performance was, as always with this chancellor, a mammoth dose of ambition. He wants to be prime minister and, as the author of a policy that had outraged many on his own side, he was in a hole. He did what it took to climb out of it.



But Osborne nurtures an even greater ambition, one that becomes more plausible with each passing day of Labour’s slow-motion disintegration. He wants to remake the political landscape, colonising not just the centre ground but the centre-left too.



He described his work as “progressive government in action”, handing money to museums and helping fund women’s health organisations, as if determined to make liberal Britain take a second look at him and his party. As he cut spending less than expected, he also raised taxes – on companies who will now have to subsidise apprenticeships. Not for the first time he was borrowing from the Ed Miliband playbook, boasting that the Tories are now “the mainstream representatives of the working people of Britain”.



The key word was “mainstream”. Osborne reckons that Labour has consigned itself to the margins, leaving the vast, wide river for him and his party to make their own, sailing on it towards a power that is beginning to look permanent.

