Osborne's budget is an attack on consumption, and a bonus for capital. It is a redistribution of wealth from the poorest to the wealthiest, on the assumption that it is the wealthy who will drive economic growth. VAT, a notoriously regressive tax, is to rise by two and half percentage points to 20% - Osborne had promised in opposition that he would not need to increase VAT, knowing how unpopular this would be. Housing benefits will be cut, disability benefits cut, child benefits frozen, and other benefits such as job seekers allowance will rise in line with CPI rather than RPI. The total annual reduction in spending on benefits will reach £11bn by 2014.

Most public sector workers will have a pay freeze for three years, meaning a de facto pay cut by whatever the rate of inflation is (currently 3.5%). Average real term spending cuts will amount to 25% except in ringfenced spending in health and international aid. 25% is a huge reduction, even bigger than anticipated, or advertised. There are a few off-setting measures that would in theory protect the poorest - linking pensions to earnings, increasing child tax credits - but the net effect will be a severe squeeze on working class consumption.

For capital, it's a different story. Government largesse flows in abundance - not for them the age of austerity. Corporation tax is to be reduced to 24% within four years. Capital gains tax will be increased for a very small minority of wealth-holders, but there will be a higher relief threshold for "entrepreneurs", such that the first £5m gained from the disposal of all or part of a business, or in the course of running a business, will be entitled to relief, reducing their tax to 10%. Small business tax will be cut to 20%, and employers contributions to National Insurance will be cut. A small bank levy will take back £2bn a year, but again it's a relatively trivial offset to a very large golden hello from the Tories and Liberals to their business friends.

The logic, insofar as logic is the correct term, is that such measures will encourage investment. Osborne complained in his budget that the state made up almost half of all income in society which was "unsustainable", and the Tories have long insisted that growth had to be stimulated in the private sector. But, as economists as diverse as Paul Krugman, Martin Wolf and Samuel Brittan point out, this is nonsense. The net effect of such measures will be to exert a serious downward pressure on demand, thus on growth and thus on investment. It will increase unemployment and reduce taxable income, which will tend to increase the deficit. David Blanchflower argued that previously announced austerity measures are likely to add a quarter of a million to the ranks of unemployed young people. And, although the media and the government have worked hard to scare people over this, repeating the mantra that there is no money, it needs to be repeated and underlined that there is no need to do this. Most of Britain's debt matures in more than a decade from now.

Politics is rarely pure, and never simple - but this is class war, pure and simple. That being the case, Bob Crow is surely right to call on the TUC to convene an emergency conference to plan and coordinate actions to defend working class living standards. He calls the cuts Thatcherite. Thatcher wishes she'd accomplished anything like this.

How to respond to such a serenade? Even as his colleague Jack Straw is busily pandering to our primitive passion for punishment, and while Blears is patronising the 'white working class', Chancellor Darling promises he will cut taxes for the poor and raise them for the rich. VAT will supposedly be cut from 17.5% to 15% and income tax on those earning £150k or more will be raised from 40% to 45%. These are not huge shifts, but I must advise the Chancellor that he risks being associated with the dread word, 'redistribution'. It is, as Nick Robinson of the BBC says, of "huge symbolic importance". Listen to me, Darling. New Labour's pact with the rich was that it would not touch their property. For a decade, it has stuck with that promise, freezing higher rate incomes taxes, slashing corporation taxes and cutting inheritance taxes. It has contained trade union pressure and implemented a public sector pay freeze. It threw tens of billions at Northern Rock in a desperate bid to maintain the institution as the private property of rich investors. Even when the government nationalised the bank, it appointed business managers to run it down, cut jobs and prepare it to be returned to the private sector. And now you tell us that you intend to cast prudence aside and embrace a minimal meliorist agenda comparable to that of, say, the Liberal Democrats or Barack Obama. What could possibly be motivating this minute shift away from kapitalist realism?

One thing this government appears to have lacked for the last year was the elemental instinct for survival. It seemed there was not a challenge it could not fluff, not a 'heartland' it could not lose, and no limit to its prevarication and deer-caught-in-the-headlights inaction in response to the economic crisis. Yet, of late, it has been rising in the polls. Labour appears to have recovered at least 5% of its vote since the Summer, and the Tory lead is no longer in double figures [pdf]. Compared to September, when the Tory lead was a whopping 24%, today's 5% looks manageable (see tracker poll [pdf]). In a recent poll taken just before Cameron abandoned his promise to match Labour's spending commitments, Mori put the Tories just 3 points ahead. Brown's personal rating has increased from 17% in May to 41% today [pdf]. And they managed to retain Glenrothes, in part because the collapse of Scottish banks necessitated a bail-out for London, which rather undermined Salmond's claim that Scotland could be part of an arc of prosperity alongside (whoops) Iceland. The government's psephological advisors have presumably recognised that the economic crisis that was killing the them last year is now redounding to their benefit. The hopeless flailing that characterised the initial response to the crisis, and the desperate clinging to neoliberal orthodoxies that even a right-wing Republican administration discarded without hesitation, were replaced after the collapse of Lehman Brothers by what looked like a far more decisive set of interventions including part-nationalisations and some curbs on the City's extravagant pay and bonuses. These were still basically pro-business policies, and they still transferred money from the public sector to the rich, but it looked far better than the Northern Jelly episode. And unlike in the US bail-out, the government insisted on voting rights in exchange for the money invested. Meanwhile, David Cameron's promises of tax cuts for businesses and big public spending cuts are probably not resonating far beyond the rabid Tory base.

Whatever is announced today is unlikely to be equal to the crisis. It will be a heavily politicised budget, however, sending out signals in advance of a 2009/10 election. A few tax cuts targeted at the poor will not substantially improve consumer spending ahead of Christmas, and the tax increases proposed for the wealthy will not raise much money, but an overall package of moderate wealth redistribution means that Darling is betting on a political realignment. And that is an interesting story in itself: it shows that the government, in its weakened state, is highly susceptible to public pressure. It shows that now is no time to relent on struggles for decent public sector pay, for better pensions, for an emergency house-building and debt-relief programe, and for public investment to protect jobs. Now is the time to push aggressively and confidently for a radical alternative programme.

The Financial Times reports the results of its latest Harris poll, which finds that from the US to China, there is a globally solid consensus against the current levels of inequality and a demand to tax the rich more and the poor less. In the UK, the figure stands at an overwhelming 76%. It is noticeable that the Tories are posing as a bit left of Labour in Crewe & Nantwich, talking about Post Offices and the 10p tax. As with the national strategy of cutting a vaguely 'progressive' jib, the Tories are banking on the fact that New Labour are unpopular for their right-wing policies, and if they can only keep Conservative spokespeople from scaring people too much, they will benefit from a massive anti-government reflux. By contrast, New Labour's 'toff' campaign is a totally depoliticised one, or at least it contains no hint of real class politics - rather, it is conjoined to a right-wing 'populist' appeal on 'yobs' and 'foreigners'. It's not so much a dog whistle as a ferocious canine howl. The Tories have been absolutely hammered in successive elections where it relied on bashing criminals and immigrants, but New Labour seems to think it's the key to electoral success. So, it is pursuing an unavailing lurch to the right. In light of this, I am intrigued to see that George Monbiot has said:

"It is clear to me that we need a left wing alternative to New Labour. That must either emerge from a coup inside Labour, which kicks out the neoliberal impostors that currently run the party, or it will have to come from people outside of the party.

"Either way the trade unions must play a central role in the process. I think we need to keep asking them why they support the government that is attacking them, and what it would take for them to break from Labour.

"I know that either option will be hard – and that we’ve already had a few false dawns – but I don’t believe that staying with New Labour is an option."

I find this encouraging in the main, despite the lingering hope in the former option, which would exhaust itself even more rapidly than John McDonnell's bid to challenge Brown. Monbiot's argument that there can be no possibility of support for the most right-wing government since the war is an important one, and I can't see much enthusiasm anywhere for retreating to the ranks of the Labour Party, despite the obvious pressure to do so. In the immediate term, we have much to rally behind - anti-fascist work, pay strikes and, as a reasonable series of measures, John McDonnell's ten point Charter for the labour movement. But in the future, and soon, we will have to break the compact in which elected parties effectively promise to protect the property of the rich and punish the poor through surreptitious welfare cuts and tax rises.