George Osbourne's thing about learning from councils is not, in and of itself, a bad move.
Working in partnership with councils is a good move, integrating the top-end policy direction with the low-level delivery of these services makes sense.
However, what they're really getting at is more and more ways to slash public spending. They can promise more services for less money all they want, but's it's largely a lie.
They are trying to soften people up for an agenda far to the right of where there were until recently. They have moved from their 'compassionate' and 'progressive' stances to their stock in trade of slash and burn.
They are not being called to account on it because Labour are so unpopular and people want a change. However, i'm not sure whether people want a change of direction, or just a new hand on the wheel