Chancellor makes pitch to voters
George Osborne has dramatically slashed stamp duty for ordinary homebuyers in a nakedly political pre-election financial package.
Delivering his final Autumn Statement before the nation goes to the polls, the Chancellor branded the existing levy a "tax on aspiration" and said he would scrap the "cliff edges" which distort the property market.
The surprise shake-up emerged after Mr Osborne was forced to admit that weak tax revenues mean the deficit is not falling as fast as hoped and will be more than £90 billion this year.
But he pointed to forecasts of surging 3% growth and appealed for voters to let him "finish the job" of overhauling the economy.
Labour attempted to capitalise on the missed targets, insisting the coalition had failed on its core purpose of eliminating the deficit and left average workers worse-off than they were when David Cameron came to power.
Mr Osborne had been forced to revise borrowing up by a total of £12.5 billion this year and next and would borrow £219 billion more in total over the course of the Parliament than he promised in 2010, said Ed Balls.
But the shadow chancellor offered Labour's support for the stamp duty change - while rejecting suggestions it meant their policy of introducing an annual "mansion tax" charge was not needed.
In his statement, Mr Osborne declared that the long-standing "slab" system - which sees buyers charged a percentage of the full purchase price as soon as the value hits thresholds - was being abandoned.
Instead, from midnight tonight, there will be a "slice" approach, with different percentage rates charged to each portion of the price.
There will be no levy under £125,000, then 2% up to £250,000, 5% to £925,000, 10% to £1.5 million, and 12% above that.
Mr Osborne said the reform represented an overall tax cut of £800 million per year, and would save buyers of an average £275,000 home £4,500.
Only buyers of homes that cost more than £937,000 will see their bills go up. Stamp duty on a £5 million house will rise from £350,000 to £514,000.
Outlining the shift, Mr Osborne told the Commons: "There has been a debate in this country about taxing houses.
"The system I introduce today replaces a badly-designed system that has distorted our housing market for decades.
"It reduces the stamp taxes for 98% of people who pay them in this country. It increases the taxes on the most expensive 2% of homes, but only asks people to pay that tax when they buy the house and they have the money.
"And it does not involve a revaluation of hundreds of thousands of homes in this country."
The Chancellor said Office for Budget Responsibility (OBR) forecasts showed Britain would be the fastest-growing advanced economy in the world this year and hundreds of thousands of jobs were being generated.
But growth is expected to slip back below 2.5% in subsequent years. And he confirmed that borrowing was estimated to be £91.3 billion this year - rather than the £86.4 billion previously expected.
"Now Britain faces a choice," Mr Osborne told MPs.
"Do we squander the economic security we have gained, go back to the disastrous decisions on spending and borrowing and welfare that got us into this mess?
"Or do we finish the job - and go on building the secure economy that works for everyone?
"I say: we stay the course. We stay on course to prosperity."
The Chancellor insisted the UK's budget deficit had been halved since 2010 and was still forecast to fall in every year. By 2018/19 the Government is due to record a surplus of £4 billion.
The OBR also anticipates above-inflation wage rises for the next four years.
Mr Osborne said the fiscal position was helped because the welfare bill and debt interest repayments had been reduced, meaning extra cash could be diverted to the NHS.
But he conceded that "substantial savings" in public spending will still be required in the next parliament. They are expected to be closer to £30 billion than the £25 billion envisaged before.
Among the other measures unveiled by the Chancellor were:
:: Inheritance tax exemptions for aid workers who go to help with the Ebola crisis;
:: Crackdown on tax avoidance, including a 25% levy on firms that divert profits overseas;
:: Non-dom charges to be increased for people who have been in the UK more than 12 years;
:: £1.2 billion revenue from bank Foreign Exchange trading fines to go to GP practices;
:: Air Passenger Duty to be abolished for under-12s.
Mr Osborne said business rates would be reviewed, with bigger discounts to help high street shops under pressure from internet competitors. He also ruled out rises in fuel duty.
On personal taxation, he said the higher rate threshold would go up in line with inflation to just under £42,385.
Declaring that the case for "English Votes for English Laws" was "unanswerable", he signalled that powers over corporation tax would be devolved to Northern Ireland.
He also set the stage for a Commons showdown with Labour over the commitment to eradicate the deficit by 2017/18, promising a vote on a new OBR charter in the new year.
Mr Balls said Mr Osborne had questions to answer about living standards, wages and tax receipts, adding: "There is a cost-of-living crisis."
And taunting the Chancellor over his missed target on the deficit, Mr Balls told MPs: "He is going to carry on missing his deficit targets for year after year."
Asked about the the stamp duty changes, Mr Balls told Sky News: "I think there will be a vote this afternoon and we will support this. The Chancellor is making a change that will make it easier for people on lower and middle incomes.
"At the top, though, he has actually conceded the argument I have been making for many months which is that at the moment our property market is substantially undertaxed.
"We will scrutinise the legislation... but in principle, yes, we will allow this to move forward, we will support it."
Confirming that Labour would still seek to introduce its annual levy on owners of property worth more than £2 million, Mr Balls said: "What our charge will do is apply that charge every year on properties worth over £2 million and we will use the money to fill in the gap in the NHS budget which the Chancellor has failed to fill in his Autumn Statement."
The Statement won a warm reception from business. John Cridland, director general of the CBI, said changes on stamp duty and business rates would be "a shot in the arm for families and growing firms", while John Longworth, director general of the British Chambers of Commerce said: "The Government has listened to our calls to improve conditions for business growth."
But TUC general secretary Frances O'Grady said Mr Osborne's figures implied "terrifying" public spending reductions and a "revolutionary programme to shrink the state".
" Making the cuts on the Chancellor's timetable will slash public spending per head from £5,650 to £3,880. That will take us back at least to the level of spending in 1948 and probably to the lowest spending levels for 80 years," said Ms O'Grady.
"All of this is the price of failure of the Chancellor's strategy. He said that his policies would eliminate the deficit by next year. Instead we are now told it will be 10 years. The worry must be that his policies will continue to fail and that austerity will become permanent with living standards continually depressed."