George Osborne, the British chancellor of the exchequer, is a lover of backgammon, a game that depends on strategy and luck, but one that also requires the complete destruction of an opponent.

So, too, Osborne’s politics: since his appointment in 2010 he has been on occasions strategic, sometimes lucky, but always focused on making the Conservatives the party of government for a generation.

Sitting down in the House of Commons after finishing his budget, Osborne did so to the sound of raucous cheers from Conservative MPs ringing in his ears, pleased by the first Conservative-only budget since 1996. Osborne’s clever presentation, however, obscures some important changes: the pace of public spending cuts is being slowed; taxes are rising, while government borrowing will be higher than he had previously planned.

"The government has delayed the expected return to a budget surplus by a year to 2019-2020 but is then aiming for a slightly bigger surplus in the medium term," the Office for Budget Responsibility said.

Deceptive politics

The politics of the budget are clever if, arguably, deceptive, dominated by headlines that spoke of Osborne giving wage rises to 2.5 million lower-paid workers and that helped mask the effects of welfare cuts which could leave many of those workers worse off.

Currently, low-paid workers aged over 20 are entitled to £6.50 an hour, rising to £6.70 in October under national minimum wage laws that were brought in by Labour during the Tony Blair years.

A campaign to deliver a living wage – a minimum of £8.80 an hour in London and £7.65 outside it – has signed up dozens of major companies. Osborne has claimed the tag of “the living wage” but is offering less: under his plan, workers aged over 25 will get £7.20 an hour from next April, though wages should rise to £9 an hour in five years’ time.

Insisting 3.25 million people would benefit – a figure which in itself says much about the UK’s low-wage, low-skills economy – the treasury pointed out that someone working 35 hours a week would see their gross pay grow by a third over the next five years.

“It can’t be right that we go on asking taxpayers to subsidise, through the tax credit system, the businesses who pay the lowest wages,” Osborne told MPs, “The government is against unfair subsidies wherever we find them.”

Corporation tax – which has already fallen from 28 per cent to 20 per cent during the Osborne years in the treasury – will fall to 19 per cent in 2017 and by a further percentage point three years later to the lowest rate of any of the world’s biggest economies in the G7.

However, the single biggest revenue-raising item comes with a change in the way corporation tax is to be collected, since payments will have to be made in the year profits are made, not a year later.

“There will be a minus figure at the end of time,” said a treasury official, dryly.

Personal tax allowances

Meanwhile, personal tax allowances will rise to £11,000 next year, and to £12,500 in time and will rise subsequently in line with changes to minimum-wage regulations, thus ensuring “we never ask the lowest paid in our society to pay income tax”.

Osborne’s headline-grabbing declarations on low pay hide some startling changes on welfare, however. For many, the focus will centre on his decision to cap benefits to £23,000 per family in London and £20,000 outside the capital. That will save less than £500 million a year.

Reducing income thresholds for tax credits and universal credits will save £15 billion annually by 2020; while freezing working-age benefits, tax credits and housing allowances for four years will save £7 billion by 2019.

Osborne has political licence for his moves, given the popularity during the election campaign of welfare curbs. “Britain is home to 1 per cent of the world’s population, generates 4 per cent of the world’s income and yet pays out 7 per cent of the world’s welfare spending,” he said.

Defending the changes to welfare benefits for those in work, Osborne said the system has to be put on a more sustainable footing: “In 1980, working-age welfare accounted for 8 per cent of all public spending. Today it is 13 per cent.

“The original tax-credit system cost £1.1 billion in its first year. This year, that cost has reached £30 billion. We spend more on family benefits in Britain than Germany, France or Sweden.”