Low income families and pensioners were given an early Christmas present by the Chancellor of the Exchequer George Osborne as he announced his Autumn Statement today, Wednesday.
Planned £4.4bn in tax credit cuts were abandoned, with taper and threshold rates for working tax credits and child tax credits remaining the same.
He announced the Government is to borrow £8bn less than forecast, with the aim of securing £10.1bn budget surplus by 2020.
Overall day-to-day Government departmental spending is to be cut by £20bn however, equivalent to 0.8% of total expenditure each year by 2020, the public sector feeling the pinch.
But policing, health, education, international aid and defence budgets have all been protected.
“The police protect us and we protect the police,” Osborne told MPs.
“We were elected as a one nation government. Today we deliver the Spending Review of a one nation government.
“The guardians of economic security. The protectors of national security. The builders of our better future.
“The government; the mainstream representatives of the working people of Britain,” he said.
However, with health, schools, defence and overseas aid all protected, it meant big cuts for other Whitehall departments.
The Department for Transport will see its operational budget cut by 37 per cent, Energy and Climate Change, Business, Innovation and Skills 22 per cent, and Environment 15 per cent.
Calum Bennie, Savings Expert at Scottish Friendly, said: “Christmas has come early to millions of low income families, who would have suffered a loss of over £1,000 a year from next April had the Chancellor not made today’s staggering u-turn on tax credits.
“Meanwhile, the increase in the state pension to £119.30 will be welcomed by pensioners, but while these small stocking fillers will soften the blow for some, others will still lose out from today’s series of announcements. In particular, student nurses will be less than enthralled following the announcement that their education will have to be funded by loans instead of grants, while other public spending cuts announced by the Chancellor will also cause real pain for many.
“From a macro point of view, the Autumn Statement once again highlights that the outlook for interest rates is unlikely to shift substantially. The need for people to make their own provision for their and their children’s financial futures is more apparent than ever, but with rates set to stay very low, now is the time to consider alternatives to cash when it comes to savings. Stocks and shares ISAs, for example, offer the potential, with risk attached, to make significantly higher returns.”
Shopworkers’ trade union leader John Hannett has welcomed the Chancellor’s reversal of tax credit cuts that would have seen the lowest paid working families lose thousands of pounds a year.
John Hannett – Usdaw General Secretary said: “The Chancellor has finally listened to us and our members. We will need to see the full detail of what the Chancellor has announced in his autumn statement, but if he has abandoned the tax credit cuts he proposed in the Budget that will be a huge relief to millions of working families who were set to suffer huge losses of income.”
“These families have already paid a high price from this Chancellor’s previous cuts in working tax credit. I hope that today’s announcement now signals an end to the dramatic slashing of low-paid working family incomes but, with his restated commitment to cutting £12 billion out of the welfare budget, we remain concerned about where the axe will fall and the effect on Universal Credit.”
Elected mayors would have the power to raise business rates for infrastructure projects, he added.
He also announced 26 new Enterprise Zones - offering tax breaks and fast-track planning - including 15 in towns.
He added: “There would be no jobs without a vibrant sector,” before announcing a cut in corporation tax from 20 to 18 per cent
Chancellor of the Exchequer George Osborne also announced in the Autumn Statement that by the end of this Parliament local councils will keep 100 per cent of business rates.
Some 600,000 of the smallest businesses would benefit from a year-long extension of small business rates relief, he added.
And he was continuing the industrial strategy, launched in the last Parliament, with a commitment to support the aerospace and automotive industries “for the next decade”.
And spending on science would rise by £500m from £4.75bn “by the end of the decade”.
An apprentice levy would be introduced in April 2017 set at 0.5 per cent of large employers’ wage bill. It was set to raise £3bn and help fund an increase in apprentices from 2m to 2m by 2020.
“It is a huge reform to raise the skills of the nation,” he said.