"This is definitely a coup, especially the way that they've kept it under wraps. I've just been talking to the advisers who helped them put it all together and it's something they've worked out over a long period. The only surprise is that Labour hasn't come up with it already: it's such a clever, and yet harmless, way of raising the money. And initially at least, it looks to me like half the cost will be met by the US Treasury.

"Overall the proposals to cut inheritance tax and stamp duty will cost £3.5 billion and the Tories reckon it can all be paid by this new offshore non-dom levy, £25,000 a year on 150,000 people who live here but don't pay tax here. It's thought, but it's impossible to say, that half of them are Americans and in America you pay your tax on your worldwide taxes, so what they pay here will be offset against what they pay there.

"If people are non-domiciled but don't earn that much then they might be better off coming into the UK tax system, and the Tories will allow them to do that. Or they might decide to move back abroad but most of them earn so much that £25,000 isn't going to deter them.

"The other thing is that there has been a question mark hanging over the status of non-doms ever since Labour came in – the Government has been reviewing their tax status. This proposal actually gives them their status in law; they will be paying for their status. It's too early to say whether there will be a violent reaction to this but the Conservatives say that they've consulted well in advance and they don't think there will be.

"Either way, it doesn't really matter to the Tory conference: it's a tax cut paid for by taxing foreigners, and rich foreigners at that. No-one is going to spill too many tears over them and George Osborne has given the Tory conference what they want, a proper tax cut. You could hear the guttural roar that greeted his announcement.

"Labour hasn't reacted yet but they will not like the fact that Osborne has set the agenda with this. I would be surprised if by mid-afternoon they had not reacted quite dramatically.

"Inheritance tax is seen as a tax on aspiration, so this will affect a lot of Labour people too. They've put out a list of house prices around the country to back that point. Given the rise in house prices, this tax cut will affect Labour supporters as well as Tories – which is why I would expect Labour to do something to match it. They cannot let George Osborne get away with such an eye-catching announcement."

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