26/06/2013 10:46 BST | Updated 26/08/2013 06:12 BST

Spending Review: Hope and Austerity

The Chancellor is widely recognised as a highly effective political operator. After today he continues to be so.

He must be hoping that the £100billion of infrastructure spending that his deputy, Danny Alexander, will announce on Thursday will be able to contain some of the backlash from the Spending Round 2013. For all the red meat thrown to backbench Conservatives; further crackdowns on welfare spending, a requirement to learn English or lose your benefits, this was a statement designed to reinforce austerity.

It certainly won't be viewed positively by the millions of public sector workers who have just learnt that their pay rise will be capped at an average of 1% in 2015-16. But that's part of the political calculation here. The Chancellor was keen to point out that for every one public sector job being lost - five private sector jobs are being created. And the Chancellor thinks that public sector workers are less likely to vote for him. And he's right.

As the Shadow Chancellor, Ed Balls, noted, George Osborne spoke for over 50 minutes. This was a statement that was Budget-like in length. Combined with tomorrow's announcement on infrastructure expenditure it is looking Budget-like in scope too.

If it was then this seems deliberate. The reductions in departmental spending and the tightening of public sector pay will have repercussions beyond Westminster and Whitehall. Behind the headlines are the many, many households who will be worrying even more than before (were that possible) about how they pay their way in the UK.

The Chancellor rightly highlighted the job creation that the private sector has achieved since 2010 but that doesn't avoid the reality that 'strivers' will continue to be under greater pressure whilst the country works its way out of austerity.

When Ed Balls rose to speak and quickly uttered the phrase "living standards" it seemed that we were watching a warm-up match for the phrase that will come to define the 2015 General Election. Voters might credit the Coalition with guiding them through the grim no-mans land of the post-crisis world, but if the Government isn't judged to have delivered that and more then things could move decisively in Labour's favour.

The Chancellor knows this and it wasn't a surprise to hear him announce new policies that will throw some meat to his backbench colleagues. On the Coalition front MPs from the South West who are predominantly Liberal Democrats or Conservatives will toast him this evening - perhaps even with the discounted water that their constituents will receive beyond 2015.

For the right of the Conservative party was further tightening on welfare totalling £4billion. This is to be achieved by stricter English-language requirements on benefit claimants, more obligations on jobseekers and a cap, or 'credit card' limit as the Chancellor described it, on benefit spending in cash terms. Importantly the cap will exclude the state pension. The battle with Ed Balls has been enjoined on pensions - and quickly.

This wasn't the only challenge that Labour will have to counter in the coming weeks. The Chancellor also showed he wasn't afraid to pinch policy ideas from the Opposition front bench. Andy Burnham, the Shadow Health Secretary, will be wondering if he should have kept his powder dry on combining social care with healthcare spending with the Chancellor announcing a post of £3.8billion for the NHS and local authorities to share according to a joint plan.

The Chancellor has plotted a nuanced line with this Spending Review hoping to split his Opposition and placate his colleagues whilst his Shadow is fast defining an easily understood counter-narrative. With reshuffles due for completion by the time of Party conferences two men continue to cement their value to their respective parties.