Osborne’s mantrap for Miliband

It was a calculated political gamble. And there’s a good chance it will work – it all depends on whether Britain’s middle class voters howl in outrage at unfairness or smile in anticipation that they’ll be winners tomorrow. George Osborne will have known perfectly well that he would face fierce political attack from Labour today and he’s done it anyway, because this was his only chance.

The Chancellor has given away £220 a year to millions of households by raising the amount you can earn without paying tax next year. It could pay for their TV Licence and ten packets of cigarettes (after a 37p rise in duty). But for three hundred thousand wealthy Britons earning more than £150,000 a year the giveaway is enormous. It may start modest at £250 for someone earning £155,000 but once you’re earning £250,000 you’ll be £5000 better off and if you earn a million pounds a year you’ll be saving a colossal £42,500.

He had to do it this year because had he left the 50p tax rate in place another year he would almost certainly have found it raised more money than he can claim it does right now – because the tax avoidance measures taken last year cannot be repeated (See Faisal Islam’s blog). And claiming the rich will end up paying more is only true up to a point. Stamp duty of 7 per cent on homes worth more than £2m will hurt – but only the very few who buy them. At the moment that’s less than 150 households a month. A millionaire who is happy not to move house can happily bank his tax cut – he will not be paying more.

Who will suffer? People on benefits are set to see further cuts, although we don’t yet know what. But they were probably not George Osborne’s number one fans anyway. And tax-paying pensioners – not the poorest – who will see an erosion in the value of their tax free allowance. But they are unlikely to see Ed Balls as the man to give them more. Labour will have to decide whether or not to extend its rhetoric about the squeezed middle to include this group of people – and when the deficit still needs paying back after the next election it is hard to imagine them promising a giveaway.

The gamble for George Osborne is about those middle class floating voters on incomes between £25,000 and £100,000. Will they really resent the fact they are being given less right now than the rich or will they buy into the idea that this is by instinct a tax-cutting government that will bring their rates down too in the next parliament and which understands aspiration?

There is then a big political trap for Ed Miliband that has just been set by George Osborne. The Conservatives would love him to concentrate his campaign, as Labour did last time, on those households living on less than £35,000 a year. Class war is good for a laugh (and it was today) but few believe you can win an election with it. The Ed Miliband they feared most was the one who spoke about the squeezed middle. He could be most dangerous if he side-stepped the mantrap and widened his definition of the middle.