Spending Review: George Osborne scraps cuts to tax credits

http://www.bbc.co.uk/news/uk-politics-34915218

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George Osborne is to scrap planned cuts to tax credits altogether - rather than ease their impact - he has told MPs.

The chancellor had been expected to raid other budgets to cover the £4.4bn cost but he said that was not now needed because of higher tax receipts.

Mr Osborne said "economic and national security" were at the heart of his Spending Review.

Health, schools and defence spending will go up - but police, local councils and other areas face big cuts.

To cheers from Conservative MPs, Mr Osborne 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."

Tax credits are due to be phased out and replaced by the new Universal Credit by 2018.

Mr Osborne is using his Autumn Statement and Spending Review to detail £20bn in budget cuts affecting a string of government departments - and £12bn in welfare cuts.

Other announcements include:

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

All eyes were on his economic forecasts, with some economists predicting he would miss his target to run a budget surplus by 2020, after worse than expected borrowing figures.

But Mr Osborne told MPs his four-year public spending plans were forecast to deliver a surplus as well as falling debt in every year that follows.

In his statement, the chancellor said his economic plan for the next four years was about choosing priorities - and insist tackling the "crisis" in home ownership is crucial.

In a shift away from free market solutions, Mr Osborne will announce plans to hand £2.3bn directly to developers to build "starter homes" for first-time buyers, in a fresh attempt to reverse the long-term decline in house building.

He will also pump £4bn into shared ownership schemes to provide more properties for households earning less than £80,000 (or £90,000 in London) who want to get on the housing ladder.

The Treasury is calling it "the biggest affordable house-building programme since the 1970s" but Labour dismissed it as more rhetoric, saying: "If hot air built homes, then Conservative ministers would have our housing crisis sorted."

The Treasury has already announced that front-line NHS services in England will get a £3.8bn, above-inflation, cash injection next year, as part of an £8bn real terms increase over the course of the Parliament.

Defence spending is to be increased, as set out in Monday's Strategic Defence and Security Review. Schools and international aid will also escape cuts.

Presented by Chancellor George Osborne, the Spending Review sets out what government spending will be over the next four years, while the Autumn Statement is an annual update of government plans for the economy.

Explained: Which government departments will be affected?

Analysis: Latest from BBC political editor Laura Kuenssberg

Special report: Full in-depth coverage of the Spending Review and Autumn Statement

Watch: The BBC's TV coverage begins on BBC Two and the BBC News Channel at 11:30 GMT, with BBC Radio 5 Live coverage from 11:55 GMT

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