Spending Review: George Osborne scraps cuts to tax credits

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

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George Osborne has scrapped planned cuts to tax credits altogether - rather than ease their impact - in his Spending Review.

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.

He also pledged real terms increases to police funding - after speculation it would be cut.

Labour said he had "betrayed" voters by failing to eliminate the deficit.

"We don't need until the weekend for this statement to fall part," said shadow chancellor John McDonnell, "Over the last five years there has barely been a target the chancellor hasn't missed or ignored."

The tax credit announcement means millions of low paid workers will not now have their benefits cut in April, as Mr Osborne had originally planned before he was forced to think again by the House of Lords.

Mr Osborne said he had "listened" to calls for the cuts to be phased in but because of improvements to the public finances he had decided the "simplest thing" was "to avoid them altogether".

For Labour John McDonnell said his handling of tax credits had been a "fiasco" and with some claimants facing cuts when the benefit is replaced by Universal Credit "this is not the full and fair reversal that we pleaded for".

Mr Osborne used his Autumn Statement and Spending Review to detail £20bn in budget cuts, with the transport, energy and climate change, justice business and other departments all having to find double digit savings in their day-to-day running costs. The Foreign Office budget will be protected, however.

Mr Osborne pushed ahead with the expected £12bn in welfare cuts, including a fresh squeeze on housing benefit.

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" and that "economic and national security" were at the heart of his plans.

He told MPs his four-year public spending plans were forecast to deliver a surplus as well as falling debt in every year that follows - there had been speculation he would miss his surplus target.

But he said solving the housing "crisis" was his top priority.

In a shift away from free market solutions, Mr Osborne announced 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. 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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