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Spending Review 2015: George Osborne scraps tax credit plans

By Staff Reporter

Published 25/11/2015

The Chancellor of the Exchequer, George Osborne delivers his joint Autumn Statement and Spending Review to MPs in the House of Commons, London. Photo: PA Wire
The Chancellor of the Exchequer, George Osborne delivers his joint Autumn Statement and Spending Review to MPs in the House of Commons, London. Photo: PA Wire
The Chancellor of the Exchequer, George Osborne delivers his joint Autumn Statement and Spending Review to MPs in the House of Commons. PA Wire
Chancellor of the Exchequer George Osborne carries a copy of his Autumn Statement as he leaves the Treasury in London. AFP PHOTO / TIM IRELAND / POOLTim Ireland/AFP/Getty Images

Chancellor George Osborne has scrapped planned cuts to tax credits for millions of low paid workers.

Unveiling his Spending Review in the House of Commons, the Chancellor said he could abandon the controversial cuts of £4.4 billion due to improvements in public finances.

Mr Osborne also revealed that the Northern Ireland block grant would hit £11billion by 2020 and investment in infrastructure would increase by over £600million over five years.

The chancellor described the proposed April 2018 cut to corporation tax as a "huge prize" for Northern Ireland.

<<<Chancellor's statement in full>>>

 

Delivering his statement, George Osborne said he would still be able to deliver the promised £12 billion in welfare cuts over the next five years while balancing the books by the end of the Parliament.

 

To Tory cheers, he told the Commons: "I've had representations that these changes to tax credits should be phased in.

 

"I've listened to the concerns. I hear and understand them.

 

And because I've been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether."

Read more:   Independent MP Lady Sylvia Hermon fury at Tory tax credit cut change

 

The surprise announcement came after the House of Lords threw out the original proposal for £4.4 billion of reductions to tax credits from April next year.

 

There had been speculation Mr Osborne would phase the cuts in instead.

 

Scrapping them altogether will be welcomed by many Tory backbenchers who were uneasy with the plans.

 

The Chancellor said higher than predicted tax receipts and lower interest rates meant the Office for Budget Responsibility estimated that public finances would be £27 billion better off over the course of the Parliament than it forecast at the time of the post-election Budget in July.

 






George Osborne has vowed that "economic and national security" will be at the heart of his plans for spending £4 trillion of taxpayers' money over the next five years.

 

The Chancellor has put boosting property ownership at the heart of the Spending Review, which is being unveiled alongside the Autumn Statement in the House of Commons.

The Spending Review as it happened:

Chancellor's statement in full

Spending Review 2015: Chancellor's statement in full  

Spending Review at a glance:

The Chancellor announced he is to scrap planned cuts to tax credits for millions of low paid workers.

He ruled out any cuts in police budgets in England and Wales.

Mr Osborne told the Commons welfare savings totalling £12 billion will be "delivered in full... in a way that helps families".

Debt forecast is to be 82.5% of national income this year, down from 83.6% at time of July Budget, Mr Osborne said. Debt is to fall to 81.7% next year, then 79.9% in 2017/18, 77.3% in 2018/19, 74.3% in 2019/20 and 71.3% in 2020/21.

The Government will borrow £8 billion less than forecast and spend £12 billion more on capital investments.

He said the deficit is to be 3.9% of national income this year, then 2.5% in 2016/17 and 1.2% and 0.2% in subsequent years, before moving to surplus of 0.5% in 2019/20 and 0.6% the following year.

Borrowing forecast for this year is cut from £74.1 billion to £73.5 billion, falling to £49.9 billion, £24.8 billion and £4.6 billion in subsequent years, reaching a surplus of £10.1 billion in 2019/20 and £14.7 billion in 2020/21.

State spending to hit 36.5% in five years - down from 45% in 2010.

There will be public spending of £756 billion this year, then £773 billion, £787 billion, £801 billion in subsequent years, reaching £821 billion in 2019/20 and £857 billion 2020/21.

The NHS is to deliver £22 billion efficiency savings in England and Department of Health to cut 25% from its Whitehall budget.

The Chancellor confirmed a commitment to £10 billion real terms increase in the health service budget delivered in full, with the first £6 billion delivered up front next year. NHS budget to rise from £101 billion today to £120 billion by 2020/21.

An additional £600 million will be spent on mental health

Response: Shadow Chancellor John McDonnell reacts

John McDonnell immediately goes on the attack: "We don't have to wait until the weekend for this to fall apart."

Over the last five years there has barely been a target the Chancellor has not missed or ignored, he says.

"We were promised that by today the deficit would be elimated.

"We are now potentially to bequeath to our children a debt of 1.5 trillion," shadow chancellor warns.

People will feel absolutely betrayed."

He describes the policy on tax credits as a "fiasco", arguing that "there was no attempt by the chancellor to understand the effects of the decision to cut tax credits".

Osborne concludes

Osborne ends at 1.38pm - just about an hour on his feet.

He says: "Today we have set out the further decisions necessary to build this country's future.

"Sometimes difficult, yes, but decisions that: Build the great public services families rely on. "Build the infrastructure and the homes people need. Build stronger defences against those who threaten our way of life. And build the strong public finances on which all of these things depend."
 

Defence budget: 'Security starts at home'

Defence budget to increase from £24billion to £40bn.

No cuts to the police budgets.

Foreign Office budget protected in real terms.

Overseas aid budget to increase £16.3 billion by 2020.

Spending on Single Intelligence Account to rise from £2.1 billion to £2.8 billion by 2020/21 and defence budget from £34 billion to £40 billion.

Homes to be built

Chancellor outlines plans to build 400,000 homes by the end of the decade and doubles the housing budget to £1billion.

Osborne says it will fund biggest housebuilding programme since the 1970s.

He says he will also ensure the will be measures to ensure homes go to families in need.

Restrictions on shared ownership to be removed and planning system reformed to deliver more homes. London Help to Buy scheme to offer interest-free loan worth up to 40% of the value of a newly built home.

There will be a new premium on second homes and buy-to-let properties.

New 3% surcharge on stamp duty for buy-to-let properties and second homes from April 2016, raising almost £1 billion.

Court and prisons to close

Chancellor says number of prisons to close, one is Holloway Women's Prison

"By selling prisons we will create more housing," says chancellor.

Under-used courts to close and money used to speed up justice system.

Free childcare

30 Hours of free childcare for those on incomes under £100k and who work for over 16 hours a week.

"From 2017, we will fund 30 hours of free childcare for working families with three and four year olds," said the chancellor

"We’ll support £10,000 of childcare costs tax-free.

"To make this affordable this extra support will now only be available to parents working more than 16 hours a week and with incomes of less than £100,000

"We will maintain the free childcare we offer to the most disadvantaged two year olds."

Tampon tax

The £15million raised from so-called tampon tax to be used to fund women's health charities and support charities.

Tax cannot be cut because of the EU, says chancellor.

Hundreds of thousands have signed a petition calling for the "unfair" tax to be abolished.

Chancellor outlines cuts to Westminster Government departments

Department for Transport operational budget cut by 37%, but transport capital spending to increase by 50% to £61 billion.

The Department for Transport's operational budget will fall by 37% but its capital spending will increase by 50% to £61bn. "That funds the largest road investment programme since the 1970s, for we are the builders," says George Osborne.

Support for climate finance to increase by 50% over the next five years, but Department for Energy and Climate Change budget to be cut by 22%.

Renewable Heat Incentive to be reduced by £700 million and energy intensive industries to be permanently exempted from environmental tariffs.

Department for Culture Media and Sport's budget cut by 5%, while administration costs are to be cut by 20%.

However, cash increase for Arts Council, national museums and galleries. Free museum entry retained.

UK Sport receives 29% increase in budget.

Councils in England and Wales will be able to add 2% to council tax bills in a bid to provide up to £2 billion for social care, the Chancellor has confirmed.

Northern Ireland block grant to increase

Northern Ireland block grant to be more than £11 billion by 2019/20 and funding for capital investment in infrastructure to rise by more than £600 million over five years.

Corporation tax reduction a "huge prize" for Northern Ireland.

He says it is about ensuring economic security of region.

Scottish block grant more than £30 billion by 2019/20 and capital spending to rise by £1.9 billion in the years to 2021.

On the regions: "Had Scotland voted for independence they would have had their own spending review.

"We would have seen catastrophic cuts, thankfully they remained part of the union."

New funding floor for Wales set at 115%, and legislation to allow the devolution of income tax to Wales without a referendum. Welsh block grant to reach almost £15 billion by 2019/20 and capital spending to rise by more than £900 million.

State pension to increase

Basic state person will rise by £3.35 making pensioners £1,125 a year better off.

Extra funding for mental health

George Osborne says the government - and public's - first priority is the NHS.

Commitment to £10 billion real terms increase in the health service budget delivered in full, with the first £6 billion delivered up front next year. NHS budget to rise from £101 billion today to £120 billion by 2020/21.

Funding has been increasing in England, but is being cut in Wales where a Labour government is in power. He says the government is delivering £6bn up front to the NHS next year.

"We're undertaking major reform to integrate health and social care by the end of this decade," says chancellor

Chancellor's U-turn on tax credits

Osborne says he has listened to concerns on tax credits and thy will be "avoided all together".

"And because I’ve been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether," he said.

"Tax credits are being phased out anyway as we introduce universal credit."

The welfare system should be fair to those that use it: Osborne

Deficit to be 3.9% of national income this year, then 2.5% in 2016/17 and 1.2% and 0.2% in subsequent years, before moving to surplus of 0.5% in 2019/20 and 0.6% the following year.

Public spending of £756 billion this year, then £773 billion, £787 billion, £801 billion in subsequent years, reaching £821 billion in 2019/20 and £857 billion 2020/21.

State spending to hit 36.5% in five years - down from 45% in 2010.

Interruption: Speaker John Bercow tells a Mr Lewis to take up yoga: "Get a grip of yourself" he says over the raucous atmosphere in chamber.

George Osborne says his critics were wrong in 2010, "and they are wrong again now".

He says the independent Office for Budget Responsibility forecasts that UK living stands and the economy will rise every year with "more than a million" more jobs created over the next five years.

Combined effects of better tax receipts and lower debt interest means a £27 billion improvement in public finances compared to July Budget.

We are determined to protect our economic security: Osborne

Four-year public spending plans are forecast to deliver a surplus as well as falling debt in every year that follows, said the Chancellor.

Since 2010, no economy in the G7 has grown faster than Britain, said the Chancellor.

Office for Budget Responsibility forecasts that the economy grows "robustly every year", living standards rise every year and more than one million extra jobs will be created over five years, says the Chancellor.

George Osborne has begun delivering Autumn Statement and Spending Review

George Osborne says statement will outline how we will "live within our means, bring down the debt and ensure national security."

"Opportunity for all," he says

Chancellor says review will outline £12bn of welfare savings outlined in Conservative manifesto and they will be "delivered in full".

"This is about helping families as we make transition to national living wage," he says.

Mr Osborne said the Spending Review was designed to make Britain "the most prosperous and secure of all the major nations of the world".

Belfast Telegraph

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