Osborne scraps cuts to tax credit and police funding
14:29 25 November 2015
George Osborne has scrapped planned cuts to tax credits for millions of low paid workers and ruled out further reductions in police budgets - but Norfolk and Suffolk police will still need to make savings.
Unveiling his Spending Review in the House of Commons, the Chancellor said he could abandon the controversial tax credit cuts of £4.4 billion due to improvements in public finances.
He 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.”
Announcing the decision to maintain police budgets, the Chancellor said he had had representations they should be cut by up to 10pc.
But he declared: “Now is not the time for further police cuts. Now is the time to back our police and give them the tools do the job.
“I am today announcing there will be no cuts in the police budget at all. There will be real terms protection for police funding.
“The police protect us, and we’re going to protect the police.”
The Government had faced pressure from senior police officers over budget cuts, especially in the wake of the Paris terror attacks.
The surprise announcement about tax credits came after the House of Lords threw out the original proposals.
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.
But Norfolk’s Police and Crime Commissioner warned the county’s constabulary would still need to find savings.
But Mr Osborne said the move would mean the Government would breach its own cap on benefits in the first years of this parliament.
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.
The Chancellor said his Spending Review was designed to make Britain “the most prosperous and secure of all the major nations of the world”.
He said Office for Budget Responsibility forecasts showed GDP growing “robustly every year”, living standards rising and more than one million extra jobs being created over five years.
The OBR had also certified that the Government’s economic plan will deliver on the commitment to reach a surplus by 2019/20 and reduce the debt to GDP ratio every year of this Parliament.
The Chancellor confirmed plans to double the housing budget with spending partly funded by new rates of Stamp Duty that will be 3pc higher on the purchase of additional properties like buy-to-lets and second homes.
He said the extra stamp duty, to be introduced next April, would raise almost a billion pounds by 2021, adding: “We’ll reinvest some of that money in local communities in London and places like Cornwall which are being priced out of home ownership.”
Concluding his speech Mr Osborne said: “Five years ago, when I presented my first Spending Review, the country was on the brink of bankruptcy and our economy was in crisis.
“We took the difficult decisions then. And five years later I report on an economy growing faster than its competitors and public finances set to reach a surplus of £10 billion.”
But shadow chancellor John McDonnell condemned Mr Osborne’s record, telling MPs that over the last five years there has barely been a target the Chancellor has not missed or ignored.
He said Mr Osborne’s handling of tax credits had been a “fiasco” and said it was essential to see the detail.
“This is not the full and fair reversal that we pleaded for,” he added.