Block your ears to the chancellor’s rhetoric. “We are the builders,” George Osborne says to the Tory faithful in Manchester. “We are the party of working people.” Disregard his “proud story of Conservative social justice”. Instead, as his purported “devolution revolution” is all about local councils, let’s dig a little deeper into the local “common ground” to see what he really has in store.

Councils are in the frontline of the often unseen cuts he passes down, devolving the axe not the cash. No need to seek some hard-pressed spot, just look at leafy, luxuriant Surrey.

David Hodge, the Surrey council leader, is no archetypal Tory. At 70, he’s something of a throwback, a reminder of a more decent Tory type, a country mile from the Cameron and Osborne coterie. Brought up in an orphanage, he talks emotionally of the needs of the children and old people in his care. He has a favourite saying: “Never forget any of us could have an accident today and end up in a wheelchair.” He is distressed that he’s been forced to place the vulnerable outside the county and wants to bring them back. His blunt message is that he has made efficiencies and can do more – but Osborne’s planned cuts are pretty much unthinkable.

Surrey’s fast-growing population, overflowing out of London, needs 13,000 new school places. He has the most over-85s – they live long in Surrey – and their costs are rising fast. Yes, he’s saving by merging Surrey’s back-offices with other councils’. Defying the government, he has raised council tax by the maximum 2% permitted every year. He’ll be pleased with the business rate change, letting him raise another 2%. “But there’s a limit,” he warns on cuts.

He’s never met Osborne, but “from the coal face” of Surrey he asks: where’s the southern powerhouse? He wants the power to borrow to build housing, a lot of it, for nurses, police and key workers priced out of his expensive county. The new right to buy for housing association tenants, with replacement homes funded by selling off Surrey’s high-value council homes, is a double hit. Every home sold, he says, should be replaced one for one.

He has just become leader of the Conservative group on the Local Government Association (LGA), whose submission to Osborne ahead of next month’s spending review sounds a hair-raising alarm. Councils have suffered a 40% cut, shedding 350,000 staff, with more than 150,000 fewer old people getting any care. It’s the political misfortune of councils to spend 60% of their funds on just 2% of people – the frail old and vulnerable children – so few citizens ever notice those services.

What is noticed are the 470 shut libraries, road repairs neglected, less street cleaning, Sure Start centres closed, school crossing patrols gone and parks untended. I’ve been talking to the leaders of Oldham, Trafford, Newcastle and other councils, but they are conflicted as to how to boast of doing well despite deep cuts – while warning that no more can be taken without dire consequences. People may not notice youth services closing, though Sean Anstee, the Tory leader of Trafford, notes a rise in youth crime after shutting five of his six centres.

Facing more cuts of as much as another 40%, the LGA’s submission to Osborne is a warning. Does he realise his own micro-managing policies, far from devolving, have imposed £10bn in new costs? A pre-election sweetener forcing councils to cut rents by 1% costs them £2.6bn. They are losing £3bn by the exemption Osborne has granted developers from a section 106 levy to pay councils for affordable housing. Universal credit loses councils more, and so does raising the minimum wage.

Osborne’s devolution may gift new powers, but as Nick Forbes, the Newcastle council leader, says: “Don’t pass the buck without passing the bucks.” Where’s the money? Osborne’s northern powerhouse project is a brilliant land-grab on Labour heartlands. He flattered seven northern leaders by sweeping them up on his grand China tour – though they had little face time to lobby him on council funding.

Winning the north is his grand political project – but in five years he needs to show real progress. At present London gets 24 times the transport infrastructure spend in the north, and is predicted to grow twice as fast. His “march of the makers” has gone backwards in manufacturing, while national growth relies on a southern property boom. Business rate reform may deepen the north/south divide – as the south keeps more of its wealth instead of redistributing it.

The delusion here is that the Tories are invading the political centre ground, or the “common ground”, vacated by Labour. But remember how far to the right is Osborne’s turf. By 2020 the state will have shrunk to just 35% of GDP, smaller even than the United States, and far below the German 45% of GDP. His common ground will be a desolate desert, and what’s left of its public realm a miserable place. Few voters have been told this is his destination. Nor is it clear what his vision is for the country once he gets there.

That single-minded purpose is why there is no U-turn on tax credits: his £12bn benefit cuts are an act of faith. David Cameron and Osborne can only lie about the effects, defying the Institute for Fiscal Studies – the great arbiter – as “not right”. Preposterous claims by ministers that cutting tax credits means “cultural change” for people already in work show how far this is from being the “workers’ party”. Dangerously, they come to believe their own fictions, as Osborne repeats yet again that we have 1% of the world’s population and 4% of the world’s wealth, but spend 7% of the world’s welfare. Even the slowest brain works out that global welfare includes the likes of Somalia and Ethiopia.

Triumph sweeps caution away: they think they see Lib Dems vanquished, Labour departing the fray, boundary changes securing everlasting victory. They talk of standing in the foothills of a decade or more of power unrestrained: all they have to fear is themselves and their hubris. The NHS teeters on financial collapse, while the social care crisis risks scandals of neglect. David Davis and the Sun warn tax credits will be their poll tax – while the referendum storm is gathering in their ranks. Europhobic invincibility makes them reckless: they may need no official opposition when they set so many land mines for themselves.