Osborne surprises his critics with his cuts U-turn

The Chancellor of the Exchequer, George Osborne delivers his joint Autumn Statement and Spending Rev

The Chancellor of the Exchequer, George Osborne delivers his joint Autumn Statement and Spending Review to MPs in the House of Commons, London. PA Wire - Credit: PA

Families receiving tax credits and bobbies on the beat were given a reprieve as the chancellor moved to quieten his critics with an unexpected cuts U-turn.

But a surprise £27bn tax windfall and boost from low interest rates failed to spare councils, second-home and buy-to-let owners and apprentice employers who were the losers of the much-anticipated reduced spending blueprint for the next five years.

George Osborne told a packed House of Commons the spending review was designed to make Britain 'the most prosperous and secure of all the major nations of the world', and that 'economic and national security' were at the heart of his plans.

As he announced a raft of schemes in this region, including £5m for the Centre for Environment, Fisheries and Aquaculture Science to improve its headquarters in Lowestoft and £7m to support new air routes – including from Norwich to Exeter and Newcastle – he claimed it was a 'spending review which delivers for the people of the East'.

But shadow chancellor John McDonnell said the chancellor had 'betrayed' voters by failing to eliminate the deficit and get debt falling.

The chancellor hailed a 50pc increase in transport infrastructure investment to £61bn and £2bn for flood protection, and also said the science budget would be protected in real terms.

But the region faced a major infrastructure setback with Network Rail announcing the Ely North junction, which will allow more trains to run between King's Lynn and London and Norwich, Ipswich and Cambridge, would not start until at least 2019 in a move dubbed a 'retrograde step'.

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Among the other key features of the spending review were new powers for local councils to introduce a social care precept to fund vital services and powers to sell off millions of pounds' worth of property – including shops, pubs and golf courses – to help plug gaps in funding for frontline services.

Mr Osborne won loud cheers from the Tory backbenches as he announced that, rather than phasing in the £4.4bn tax credit changes, as expected, he was going to 'avoid them altogether'.

Waveney MP Peter Aldous, one of a number of Conservatives who raised concerns about the immediate impact of the welfare cut, said: 'They have gone away, they have looked at it and they have realised that it really wasn't a sensible thing to move forward with, and it was good news the chancellor made that announcement.'

And Conservative glee mounted when Mr Osborne declared that he would ignore a suggestion from shadow home secretary Andy Burnham that police budgets could be cut by up to 10pc, and would instead protect them in real terms.

'Now is not the time for further police cuts. Now is the time to back our police and give them the tools to do the job,' he added.

The chancellor also confirmed plans to double the housing budget, with spending partly funded by a new 3pc surcharge on stamp duty for the purchase of second homes and buy-to-let rental properties.

Proceeds will be reinvested in areas where local people are being priced out of home ownership, he said.

Paul Johnson, the director of the Institute for Fiscal Studies, said the chancellor had 'got a bit lucky' with the revised estimates for tax receipts.

Although scrapping the cuts to tax credits meant he would take a short-term hit next year on borrowing, in the long run the reduction to the welfare bill would be the same as previously planned as the new universal credit will simply be less generous than it would have been, he added.

TUC general secretary Frances O'Grady said: 'The chancellor has been forced into a spectacular climbdown on tax credits, but by the end of the Parliament many working people will still suffer big losses because he is keeping planned cuts to universal credit.'

CBI director-general Carolyn Fairbairn said businesses would be 'pleased' by the chancellor sticking to his guns on deficit reduction while committing himself to an industrial strategy.

Setback to King's Lynn to London rail services – Page 11

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