David Cameron has issued a toff’s challenge to Labour following the Prime Minister’s suggestion that the Tory tax policies had been “dreamed up on the playing fields of Eton”.

“If Gordon Brown and Mandelson and the rest want to fight a class war, fine, go for it,” said the Tory leader, yesterday. “It’s a petty, spiteful, stupid thing to do, but if that’s what they want to do, you know, go ahead.” Game on! Snotty-nosed Labour oiks are rather partial to a bit of spite and are likely to spend most of the next four months thumbing their noses at Lord Snooty and his pals.

Privilege is Cameron’s Achilles heel, and they know it. Tories are furious that their green god, prospective candidate Zac Goldsmith, had failed to reveal until now that he is a “non-dom”: a beneficiary of a tax avoiding device which involves registering your tax affairs abroad. Lord Ashcroft, the Tory chairman, is another suspected tax exile who has refused to say whether he pays full British taxes.

The signs of the Conservative leadership’s insecurity about their class origins are everywhere. Consider the way they invariably field their plain-speaking party chairman, Eric Pickles – a kind of Tory John Prescott – for interviews whenever class is liable to be raised. Ministers such as William Hague, who have gone to state schools, make a big deal of it on official Tory websites, whereas the many senior Tories who went to private schools are rather less keen on saying so.

The story that the Tory candidate for Somerton and Frome, Annunziata Rees-Mogg, was asked to change her name to the more proletarian Nancy Mogg may be apocryphal,

but it will stick nevertheless. Remember that infamous picture of the old Bullingdonians – George Osborne, David Cameron, Boris Johnson – wearing their £2000 tailcoats and looking down contemptuously through the camera.

There’s no getting away from it. The present-day Tory leadership is steeped in privilege and class. It is dishonest and self-defeating to pretend that they’re just ordinary blokes, with Ford Mondeos, who like going down the pub to natter about the footie. It’s bad politics as well. I think that the British people probably agree with David Cameron that “it’s not where you come from that matters but where you are going”. Labour came to grief in the Nantwich by-election when they sent a chap in a top hat around after the Tory candidate – that kind of crude panto is naff. Everyone knows that really rich people dress down these days.

Look at how London, the most cosmopolitan city in the world, took the original upper class twit, Boris Johnson, to their hearts and made him mayor following Ken Livingston, who was himself like a cartoon class warrior of the left. People really don’t care what school you went to – Tony Blair went to Fettes remember. What they do care about is what politicians do in office, and it is here – I believe – that Cameron has fallen into a class-war trap laid by Labour.

On Wednesday, the Chancellor, Alistair Darling, will announce that Britain is nearly £180bn in the red and heading for a deficit of 12% of GDP. To get that in perspective, under the EU’s Maastricht Treaty rules, governments are not allowed to spend more than 3% of GDP. Latvia had to call in the IMF when it reached 6% and even Iceland never reached Britain’s level of public indebtedness.

The government has justified this on the grounds of fiscal stimulus; that these were emergency measures required to avoid another Great Depression. But as with everything Gordon Brown does, there was a political booby trap in the figures, and the Tories have tripped it.

Conservatives have little liking for the public sector at the best of times, thinking that every pound spent there is a pound wasted. The recession has brought this loathing to the surface.

Ever since the banking crisis broke they’ve been talking with barely disguised enthusiasm about how they were going to slash public spending after the election – freezing public sector pay, renegotiating pensions, slashing services and cutting jobs.

This was exactly what Gordon wanted them to do – evoke folk memories of the darkest days of Thatcherism, when millions were thrown out of work in Labour heartland areas such as Scotland and the north of England; when schools fell apart and waiting lists grew in the NHS as teachers downed chalk and nurses took to the streets in protest. To eliminate the deficit entirely, Cameron would need to make cuts equivalent to the cost of the NHS and the education system.

Macho talk about declaring war on public services goes down very badly with voters – especially women voters, and Gordon Brown knows it. This is why the PM almost invited commentators to cast him as a big spender. It was a red rag to the Tory bull. Now Brown can claim that the Cameronians are only interested in looking after themselves, with their cuts in inheritance and other taxes, while they throw the country out on the streets. This is far more damaging than where the leader of the opposition went to school.

I don’t think it will win Labour the election but, then, perhaps Labour no longer expects to. It is quite happy to leave a scorched earth for the Tories to inherit. There’s no doubt that the economic situation is dire. If you add in the bank rescues (£1 trillion or so), the unfunded liabilities of the public sector pensions (another £1 trillion), the liabilities of the nationalised banks such as RBS (yet another £1 trillion) you find that Britain’s overall sovereign liability reaches levels that are truly frightening.

This doesn’t all have to be paid at once, of course. Only the interest on the actual money borrowed, and interest rates are very low right now. But you have to be sure that there are going to be people prepared to lend Britain this kind of money in future, or else we end up like a damp Dubai.

As the global economy recovers, and the pound’s value falls, inflation will increase and so will interest rates. Britain may have great diffuculty raising the money to roll over our massive debts, and the Tories might be even looking at default – Tory equivalent of the IMF being brought in by Labour’s Denis Healey in 1976.

To see that, it’s almost worth Labour losing the election.