George Osborne is a political strategist, not an economist. He gleefully scatters traps, then rests on a perch, waiting for his opponents to absent-mindedly stumble into them. This time, with his plan to slash tax credits, he set his trap, whistled and rubbed his hands in anticipation – and stumbled into it himself.

After the Liberal Democrats self-immolated by making a solemn election pledge they would not keep, you would expect other parties to be more cautious about offering commitments that are guaranteed to be betrayed. Few were persuaded by the Lib Dems’ protestations that a coalition inevitably meant compromise. Fewer still would be convinced by this excuse ludicrously flipped on its head: the Tories never expected to win, and believed their pledge to slash social security by £12bn would be diluted amid the clammy handshakes of a backroom coalition deal.

George Osborne says he will 'lessen the impact' of tax credit cuts Read more

Yet David Cameron pledged that tax credits would not “fall” in the run-up to the May surprise; Michael Gove explicitly told the BBC that “we are not going to cut” tax credits. They believed, quite correctly, that to commit to reducing the income of millions of working people would imperil their chances of forming a government. And in doing so, they deceived the British people in order to win an election on false pretences. So now to reinvent themselves as radical constitutional reformers, feigning newly found outrage at the lack of legitimacy enjoyed by an unelected second chamber, is as opportunistic as it is unconvincing.

But Osborne’s colossal stupidity – and I judge this on his terms, not on my own – is even more profound. You spend years patronising “hard-working Britons doing the right thing”, largely in an attempt to inflame their resentment at the state benefits received by supposedly undeserving types. You then, post-election, audaciously try to reinvent the Tories as the party of working people. You do not need political genius to see that simultaneously committing to slashing support for millions of workers, leaving over three million working families with an average of £1,350 a year less to look after their children, is going to hinder your relaunch. Like a newly announced vegan tucking into a Sunday roast, lecturing about the evils of animal slaughter between mouthfuls of red meat, your alleged conversion is unlikely to persuade. Neither is it particularly wise to pick a battle that divides your own side, unites your opposition and goes against the sentiments of public opinion. And a policy that means letters will land on doormats in the run-up to Christmas containing details of how much each family will lose means a searing memory millions of voters are unlikely to forget.

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Osborne likes to see himself as the master tactician; now he looks like the great blunderer: from Darth Vader to Benny Hill in a matter of days. But as he flounders in a pit of his own creation, now is the time to hammer all his failures, again, on his own terms: on the deficit (supposed to have been eliminated this year); debt (more added than all Labour governments combined); growth (weakest in decades). And his terrible record is a great opportunity for Labour, if they seize it.

The left – myself included – have long made the point that tax credits represent a subsidy for low pay. A twisting of this line is to portray it as an argument in favour of Osborne’s cuts. This is embarrassingly disingenuous nonsense. There is no evidence whatsoever that cutting tax credits will mean wages will rise. The whole point is that if wages rise, spending on tax credits – and other in-work benefits, like a significant chunk of housing benefit expenditure – will automatically fall. If you impose cuts to tax credits, you are conceding that wages will not rise to cover the gap: if they did, you would achieve the savings anyway. That spending on tax credits is so high is yet another indictment of Osborne’s record, and his failure to build a high-wage, high-productivity, high-skill economy. Last year, for example, £900m more than anticipated was spent on tax credits, precisely because Osborne’s economic strategy has driven so many into low-paid jobs leaving them reliant on state benefits, less able to contribute taxes, and with a reduced ability to spend money and boost demand in the economy.

There is no evidence whatsoever that cutting tax credits will mean wages will rise

Sustained wage rises need higher productivity, but, as the Economist puts it, “the French could take Friday off and still produce more than Britons do in a week.” Osborne spoke grandiloquently about the “march of the makers”, but this quarter’s weak GDP growth reveals construction has slumped by 2.2% and manufacturing by 0.3%. The worst current accounts deficit in the industrialised world suggests a story of a country not paying its way in the world. If a global economic crisis were to materialise, let us put it on record now: Osborne has left us monstrously ill-prepared.

This is why Labour has to abandon anti-austerity – a term that has never really resonated with the public, despite the left’s best efforts – in favour of being pro something else: an industrial strategy that prepares us for future challenges – like Germany and its investment in renewable energy, creating hundreds of thousands of secure, middle-income skilled jobs.

Hi-tech industries, backed by a thriving research and development sector that is difficult to simply uproot to cheaper, poorer countries, are surely a priority too, as is a minimum wage that rises to £10, complemented with aid for small businesses and publicly owned investment banks that give them a secure line of credit; a national commission on Britain’s productivity crisis, convening great economic minds to address what the country does about it – the answers will help unlock sustainable rising wages; and making the case for how trade unions and collective bargaining can raise wages and productivity – bear in mind that wages were flatlining or falling even before the crash.

If Labour can answer these questions, it will be in a far better position: able to commit to higher wages, reduced spending on social security without throttling working families, rebalancing the economy, preparing the country for future shocks, and having a positive vision rather than simply being against Osborne’s failure.

There is something rather beguiling about a chancellor with strategic pretensions that exceed his abilities being hoist with his own petard. But the real answer is not to gloat over his bungled mess, but to find a positive alternative that inspires the country. Over to you, Labour.