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Spending review 2015: George Osborne scraps tax credit cuts and freezes police budget - as it happened
Spending review 2015: George Osborne scraps tax credit cuts and freezes police budget - as it happened
(about 21 hours later)
6.49pm GMT
6.49pm GMT
18:49
18:49
Political summary
Political summary
Andrew Sparrow
Andrew Sparrow
We should have seen it coming. On the Marr show on Sunday George Osborne said:
We should have seen it coming. On the Marr show on Sunday George Osborne said:
I’ve always been someone who thought it’s not a weakness to listen to good arguments.
I’ve always been someone who thought it’s not a weakness to listen to good arguments.
That was a euphemistic way of saying, ‘When I’m wrong, I’ll admit it.’ And today George Osborne performed the biggest U-turn we’ve seen from the Treasury since Alistair Darling had to find £2.7bn to compensate those losing out from Gordon Brown’s abolition of the 10p rate of tax. To his credit, there was no weaselling, or fudging, or pretending “circumstances had changed”; Osborne just accepted the tax credit cuts were a non-starter and chucked them overboard. (Rupert Harrison, his former chief of staff, says that Osborne is a great believer in accepting when you’re going to lose – see 1.02pm.) In what is being dubbed as another U-turn, Osborne has also shelved the proposed police cuts. The whole performance has been funded by a surprise £27bn fiscal windfall, although Osborne is also raising taxes, principally on big business which will have to find almost £3bn a year from 2017 to pay an apprenticeship levy.
That was a euphemistic way of saying, ‘When I’m wrong, I’ll admit it.’ And today George Osborne performed the biggest U-turn we’ve seen from the Treasury since Alistair Darling had to find £2.7bn to compensate those losing out from Gordon Brown’s abolition of the 10p rate of tax. To his credit, there was no weaselling, or fudging, or pretending “circumstances had changed”; Osborne just accepted the tax credit cuts were a non-starter and chucked them overboard. (Rupert Harrison, his former chief of staff, says that Osborne is a great believer in accepting when you’re going to lose – see 1.02pm.) In what is being dubbed as another U-turn, Osborne has also shelved the proposed police cuts. The whole performance has been funded by a surprise £27bn fiscal windfall, although Osborne is also raising taxes, principally on big business which will have to find almost £3bn a year from 2017 to pay an apprenticeship levy.
Tory MPs seemed delighted. By rights, it should have been a bit of a humiliation (not least because Osborne will have to go to the Commons to seek permission to breach his own welfare cap) but Conservatives seem happy to forgive him for extricating himself from a mess that they were applauding when he created in his summer budget. It just goes to show that sometimes politicians have a memory span that would shame a goldfish.
Tory MPs seemed delighted. By rights, it should have been a bit of a humiliation (not least because Osborne will have to go to the Commons to seek permission to breach his own welfare cap) but Conservatives seem happy to forgive him for extricating himself from a mess that they were applauding when he created in his summer budget. It just goes to show that sometimes politicians have a memory span that would shame a goldfish.
More seriously, it illustrates how ministers with authority can get away with almost anything. And political figures without authority … well, just ask John McDonnell. In other circumstances his Mao’s Little Red Book gag might have worked, but if you are a shadow chancellor trying to shake off assertions that you are a far-left obsessive, quoting Mao in the Commons chamber is probably not a wise idea. Earlier I said it did not matter much because no one ever paid any attention to the shadow chancellor’s response. Sorry, that was wrong; on this occasion they will.
More seriously, it illustrates how ministers with authority can get away with almost anything. And political figures without authority … well, just ask John McDonnell. In other circumstances his Mao’s Little Red Book gag might have worked, but if you are a shadow chancellor trying to shake off assertions that you are a far-left obsessive, quoting Mao in the Commons chamber is probably not a wise idea. Earlier I said it did not matter much because no one ever paid any attention to the shadow chancellor’s response. Sorry, that was wrong; on this occasion they will.
That’s all from us for tonight. Thanks for the comments.
That’s all from us for tonight. Thanks for the comments.
6.44pm GMT
6.44pm GMT
18:44
18:44
Economic summary - £27bn of good news
Economic summary - £27bn of good news
Graeme Wearden
Graeme Wearden
He doesn’t really need the money, but George Osborne could consider picking up a lottery ticket or two on the way home tonight - as he’s clearly on a lucky streak.
He doesn’t really need the money, but George Osborne could consider picking up a lottery ticket or two on the way home tonight - as he’s clearly on a lucky streak.
The Office for Budget Responsibility got the chancellor out of a sticky spot tonight, with a surprisingly upbeat view of the economy and unexpected changes to its modelling; which worked out in Osborne’s favour.
The Office for Budget Responsibility got the chancellor out of a sticky spot tonight, with a surprisingly upbeat view of the economy and unexpected changes to its modelling; which worked out in Osborne’s favour.
They also caught out those of us who, ahem, thought this year’s deficit target was in doubt #meaculpa
They also caught out those of us who, ahem, thought this year’s deficit target was in doubt #meaculpa
The OBR’s upward revisions are good news - there’s an extra £27bn of revenue to tap into. The big picture hasn’t changed - growth will only be around trend levels over the next five years, and the national debt will reach a hefty £1.7 trillion by the time the books are balanced.
The OBR’s upward revisions are good news - there’s an extra £27bn of revenue to tap into. The big picture hasn’t changed - growth will only be around trend levels over the next five years, and the national debt will reach a hefty £1.7 trillion by the time the books are balanced.
But there are significant differences between the measures announced today, and those implemented in the last parliament. Osborne 2.0 is taking a different approach than the original version.
But there are significant differences between the measures announced today, and those implemented in the last parliament. Osborne 2.0 is taking a different approach than the original version.
As this chart shows, the consolidation in this parliament relies more on welfare cuts and tax receipts, and less on spending cuts (despite the swingeing measures outlined today)
As this chart shows, the consolidation in this parliament relies more on welfare cuts and tax receipts, and less on spending cuts (despite the swingeing measures outlined today)
And the government has also lifted and smoothed the path of current spending; it’s no longer planning the severe squeeze outlined in March’s budget:
And the government has also lifted and smoothed the path of current spending; it’s no longer planning the severe squeeze outlined in March’s budget:
The City has taken today’s statements in its stride.
The City has taken today’s statements in its stride.
Housebuilding shares jumped by around 3%, on the back of the plan to boost home construction. But the pound is calm tonight at $1.512 to the US dollar, and borrowing costs (yields on UK gilts) are little changed.
Housebuilding shares jumped by around 3%, on the back of the plan to boost home construction. But the pound is calm tonight at $1.512 to the US dollar, and borrowing costs (yields on UK gilts) are little changed.
Two sectors of the UK economy are griping tonight.
Two sectors of the UK economy are griping tonight.
The first - buy-to let and second-home owners - may not get masses of sympathy over the stamp duty hike. It’s not clear how those changes will pan out; it could make buy-to-let much less attractive, and push down house prices. Or landlords could squeeze renters with higher bills.
The first - buy-to let and second-home owners - may not get masses of sympathy over the stamp duty hike. It’s not clear how those changes will pan out; it could make buy-to-let much less attractive, and push down house prices. Or landlords could squeeze renters with higher bills.
Business leaders are also grinding their teeth, as they wonder how they’ll find £11bn to cover the Apprenticeship Levy to fund 3 million trainee workers from 2017. Obvious targets include squeezing wages, cutting back on investment, and trimming dividends. They would all be counter-productive for growth.
Business leaders are also grinding their teeth, as they wonder how they’ll find £11bn to cover the Apprenticeship Levy to fund 3 million trainee workers from 2017. Obvious targets include squeezing wages, cutting back on investment, and trimming dividends. They would all be counter-productive for growth.
And spare a thought for students, hit with funding cuts and the prospect of paying back their loans sooner (once they find a job)
And spare a thought for students, hit with funding cuts and the prospect of paying back their loans sooner (once they find a job)
The Chancellor protected the state pension but loaded more debt onto students. My blog: https://t.co/LcOTabx1Cg
The Chancellor protected the state pension but loaded more debt onto students. My blog: https://t.co/LcOTabx1Cg
Ultimately, even Lucky George can only do so much -- Britain is still vulnerable to global forces, and a Chinese “hard landing”, or severe geopolitical upheaval, could knock the OBR’s forecasts offline.
Ultimately, even Lucky George can only do so much -- Britain is still vulnerable to global forces, and a Chinese “hard landing”, or severe geopolitical upheaval, could knock the OBR’s forecasts offline.
Updated
Updated
at 6.55pm GMT
at 6.55pm GMT
6.03pm GMT
6.03pm GMT
18:03
18:03
The Resolution Foundation has led the way in campaigning against the tax credit cuts originally planned by Osborne. Here is the verdict on today’s autumn statement from Torsten Bell, its director.
The Resolution Foundation has led the way in campaigning against the tax credit cuts originally planned by Osborne. Here is the verdict on today’s autumn statement from Torsten Bell, its director.
On tax credits it is very welcome that the vast majority of families will not see losses next April. The chancellor has done the right thing by reversing these tax credit cuts entirely, rather than fudging the issue.
On tax credits it is very welcome that the vast majority of families will not see losses next April. The chancellor has done the right thing by reversing these tax credit cuts entirely, rather than fudging the issue.
However Universal Credit is the big loser because the cuts to it have not been reversed. Millions of low-income working families are still set to be significantly worse off by the end of the parliament if the Universal Credit roll-out goes ahead as planned. Pain tomorrow is better than pain today – but it is still pain.”
However Universal Credit is the big loser because the cuts to it have not been reversed. Millions of low-income working families are still set to be significantly worse off by the end of the parliament if the Universal Credit roll-out goes ahead as planned. Pain tomorrow is better than pain today – but it is still pain.”
The Chancellor has toned down his plans to shrink the state. But we will still see large cuts that radically change what that state does. By the end of the parliament, the state will be focused on delivering healthcare and paying pensions, but will do much less to support young people or those on low-incomes.
The Chancellor has toned down his plans to shrink the state. But we will still see large cuts that radically change what that state does. By the end of the parliament, the state will be focused on delivering healthcare and paying pensions, but will do much less to support young people or those on low-incomes.
And here is the Resolution Foundation’s full briefing on the autumn statement.
And here is the Resolution Foundation’s full briefing on the autumn statement.
5.59pm GMT
5.59pm GMT
17:59
17:59
Small print alert: Railway electrification plan still running late
Small print alert: Railway electrification plan still running late
Gwyn Topham
Gwyn Topham
The chancellor proclaimed in the autumn statement that the big rail electrification projects that were put on hold in the summer, the Midland mainline and TransPennine route, would now go ahead.
The chancellor proclaimed in the autumn statement that the big rail electrification projects that were put on hold in the summer, the Midland mainline and TransPennine route, would now go ahead.
The suspension of the schemes had threatened to undermine the “Northern Powerhouse” plan”.
The suspension of the schemes had threatened to undermine the “Northern Powerhouse” plan”.
But they will still be finished late - and the money will mainly be raised by selling off railway land, and an extra £700m will be borrowed, adding to Network Rail’s £38.5bn debt.
But they will still be finished late - and the money will mainly be raised by selling off railway land, and an extra £700m will be borrowed, adding to Network Rail’s £38.5bn debt.
A review by Network Rail’s chairman Peter Hendy has now confirmed that the majority of the five-year plan can now go ahead with additional investment but found that the original plan was “unrealistic and undeliverable”.
A review by Network Rail’s chairman Peter Hendy has now confirmed that the majority of the five-year plan can now go ahead with additional investment but found that the original plan was “unrealistic and undeliverable”.
Depots, shop space at station and the land under railway arches is all expected to be sold off, to help plug the funding gap after massive cost overruns on electrification work.
Depots, shop space at station and the land under railway arches is all expected to be sold off, to help plug the funding gap after massive cost overruns on electrification work.
Hendy said no project would now be cancelled and the bulk of the work would be delivered by March 2019. He said “Some projects will cost more and take longer than originally expected but we will see the job through to deliver better journeys for passengers. My review has clearly found that the original plan was unrealistic and undeliverable.”
Hendy said no project would now be cancelled and the bulk of the work would be delivered by March 2019. He said “Some projects will cost more and take longer than originally expected but we will see the job through to deliver better journeys for passengers. My review has clearly found that the original plan was unrealistic and undeliverable.”
A separate review by Dame Colette Bowe into the embarrassing Network Rail fiasco has also been slipped quietly out today.
A separate review by Dame Colette Bowe into the embarrassing Network Rail fiasco has also been slipped quietly out today.
Updated
Updated
at 5.59pm GMT
at 5.59pm GMT
5.43pm GMT
5.43pm GMT
17:43
17:43
Earlier Andy Burnham, the shadow home secretary, said police spending was only being protected in cash terms, not in real terms. See 2.59am. But the Treasury says that is not true. The autumn statement document says:
Earlier Andy Burnham, the shadow home secretary, said police spending was only being protected in cash terms, not in real terms. See 2.59am. But the Treasury says that is not true. The autumn statement document says:
The government will protect overall police spending in real terms over the spending review period, an increase of £900m in cash terms by 2019-20.
The government will protect overall police spending in real terms over the spending review period, an increase of £900m in cash terms by 2019-20.
5.40pm GMT
5.40pm GMT
17:40
17:40
5.40pm GMT
5.40pm GMT
17:40
17:40
John McDonnell, the shadow chancellor, has just given an interview to Sky News. He said that Labour had three goals in its campaigning ahead of the autumn statement: to stop the tax credit cuts; to protect police budgets; and to get more money for social care. On the first two at least Labour has been largely successful.
John McDonnell, the shadow chancellor, has just given an interview to Sky News. He said that Labour had three goals in its campaigning ahead of the autumn statement: to stop the tax credit cuts; to protect police budgets; and to get more money for social care. On the first two at least Labour has been largely successful.
But he stressed that the devil was in the detail. Labour thought that families could still be losing out by up to £3bn, he said.
But he stressed that the devil was in the detail. Labour thought that families could still be losing out by up to £3bn, he said.
Asked if his Little Red Book stunt was a mistake, he said it wasn’t. He was just making a point about how Osborne was opposed to the British government nationalising services while quite happy to let state-run Chinese enterprises operate in this country. He was not holding Mao up as a role model, he said.
Asked if his Little Red Book stunt was a mistake, he said it wasn’t. He was just making a point about how Osborne was opposed to the British government nationalising services while quite happy to let state-run Chinese enterprises operate in this country. He was not holding Mao up as a role model, he said.
5.32pm GMT
5.32pm GMT
17:32
17:32
Conservative MPs have given the chancellor a thumping good welcome over at Westminster:
Conservative MPs have given the chancellor a thumping good welcome over at Westminster:
Prolonged banging of desks as @George_Osborne arrives at 1922 meeting
Prolonged banging of desks as @George_Osborne arrives at 1922 meeting
(Desk-banging is a traditional sign of approval at the 1922 committee - the weekly gathering of Tory backbenchers).
(Desk-banging is a traditional sign of approval at the 1922 committee - the weekly gathering of Tory backbenchers).
Mind you, those desks got a good banging back in July (when Osborne announced the tax credit cuts abandoned today), so the ‘22 aren’t infallible.
Mind you, those desks got a good banging back in July (when Osborne announced the tax credit cuts abandoned today), so the ‘22 aren’t infallible.
Updated
Updated
at 5.41pm GMT
at 5.41pm GMT
5.27pm GMT
5.27pm GMT
17:27
17:27
important detail on Police Funding - ten forces currently charging smallest amount of council tax can increase their precepts by £5 a year
important detail on Police Funding - ten forces currently charging smallest amount of council tax can increase their precepts by £5 a year
5.25pm GMT
5.25pm GMT
17:25
17:25
John McDonnell, the shadow chancellor, has not given any TV interviews yet about the autumn statement. His Labour colleagues are having to field questions about his Little Red Book stunt, and the general view seems to be that he would have been better off leaving that joke on the cutting room floor. Here’s a line from Angela Eagle, the shadow business secretary.
John McDonnell, the shadow chancellor, has not given any TV interviews yet about the autumn statement. His Labour colleagues are having to field questions about his Little Red Book stunt, and the general view seems to be that he would have been better off leaving that joke on the cutting room floor. Here’s a line from Angela Eagle, the shadow business secretary.
Angela Eagle on McDonnell's Mao moment: "I don't know whether it was funny or not. I think it probably backfired a bit."
Angela Eagle on McDonnell's Mao moment: "I don't know whether it was funny or not. I think it probably backfired a bit."
5.17pm GMT
5.17pm GMT
17:17
17:17
Chris Leslie, the former shadow chancellor, has told BBC that it would be wrong to see the tax credits concession as a U-turn. That is because, as tax credits get phased out and claimants move over to universal credit, the new, less generous benefit regime will come into force anyway.
Chris Leslie, the former shadow chancellor, has told BBC that it would be wrong to see the tax credits concession as a U-turn. That is because, as tax credits get phased out and claimants move over to universal credit, the new, less generous benefit regime will come into force anyway.
Ben Richards, a researcher for the SMF thinktank, has explained more in a briefing from the SMF. He said:
Ben Richards, a researcher for the SMF thinktank, has explained more in a briefing from the SMF. He said:
The chancellor performed a major U-turn on tax credits by cancelling the reforms altogether. Instead tax credit claimants will only be affected by the freeze in benefits over the next four years, rather than a cash-terms cut.
The chancellor performed a major U-turn on tax credits by cancelling the reforms altogether. Instead tax credit claimants will only be affected by the freeze in benefits over the next four years, rather than a cash-terms cut.
However, cuts to Universal Credit will remain, and will mean that new Universal Credit claimants are likely to face much more meagre levels of support than those claiming tax credits. In the long run this will mean that the Chancellor’s tax credit cuts in effect are implemented anyway. In the short run, however, it will create a number of issues for claimants, and will make the task of communicating the benefits of Universal Credit an uphill struggle for the Government.
However, cuts to Universal Credit will remain, and will mean that new Universal Credit claimants are likely to face much more meagre levels of support than those claiming tax credits. In the long run this will mean that the Chancellor’s tax credit cuts in effect are implemented anyway. In the short run, however, it will create a number of issues for claimants, and will make the task of communicating the benefits of Universal Credit an uphill struggle for the Government.
First, there are likely to be large inequities between different areas, with areas that have already implemented Universal Credit offering much lower support. In 2016-17 for instance, a one-earner couple with two children would take home nearly £800 more if living in an area using the tax credit system, compared to an area using Universal Credit, if working full-time earning the minimum wage. This could create perceptions of regional unfairness.
First, there are likely to be large inequities between different areas, with areas that have already implemented Universal Credit offering much lower support. In 2016-17 for instance, a one-earner couple with two children would take home nearly £800 more if living in an area using the tax credit system, compared to an area using Universal Credit, if working full-time earning the minimum wage. This could create perceptions of regional unfairness.
Second, tax credit claimants have a big incentive not to change their circumstances in areas in which Universal Credit is being rolled out. Since new claimants, and claimants with changed circumstances, are likely to be enrolled in Universal Credit, those already receiving tax credits would do well to stay on them by keeping their circumstances unchanged. This could mean refusing to take on more work, or refusing a promotion, for fear of being unable to reclaim tax credits at a later date.
Second, tax credit claimants have a big incentive not to change their circumstances in areas in which Universal Credit is being rolled out. Since new claimants, and claimants with changed circumstances, are likely to be enrolled in Universal Credit, those already receiving tax credits would do well to stay on them by keeping their circumstances unchanged. This could mean refusing to take on more work, or refusing a promotion, for fear of being unable to reclaim tax credits at a later date.
5.07pm GMT
5.07pm GMT
17:07
17:07
Our economics editor, Larry Elliott, says the Office for Budget Responsibility did George Osborne a big favour today, by adjusting their forecasts so dramatically:
Our economics editor, Larry Elliott, says the Office for Budget Responsibility did George Osborne a big favour today, by adjusting their forecasts so dramatically:
Chote’s team have had another look at their forecasts for likely tax revenues. They have done some modelling. And they have concluded that more money is going to come rolling in to HMRC over the next few years than previously envisaged. To be precise, an extra £2.5bn this year, £4.1bn next year, £6.3bn in 2017-18 and £5.4bn in the year after that.
Chote’s team have had another look at their forecasts for likely tax revenues. They have done some modelling. And they have concluded that more money is going to come rolling in to HMRC over the next few years than previously envisaged. To be precise, an extra £2.5bn this year, £4.1bn next year, £6.3bn in 2017-18 and £5.4bn in the year after that.
With all this lovely lolly flowing in, Osborne could get himself off the hook on tax credits. Provided, of course, that the tax really does come in on forecast. Chote will clearly be top of the chancellor’s Christmas cards list this year, because it has enabled him to execute a U-turn with the minimum of fuss.
With all this lovely lolly flowing in, Osborne could get himself off the hook on tax credits. Provided, of course, that the tax really does come in on forecast. Chote will clearly be top of the chancellor’s Christmas cards list this year, because it has enabled him to execute a U-turn with the minimum of fuss.
It has to be said, though, that the OBR’s forecasts have proved wanting in the past. They could easily be wrong again.
It has to be said, though, that the OBR’s forecasts have proved wanting in the past. They could easily be wrong again.
Related: OBR lets George Osborne off the hook over tax credits
Related: OBR lets George Osborne off the hook over tax credits
5.03pm GMT
5.03pm GMT
17:03
17:03
“Funny-money forecasts”... “ Sheer brazen cheek”.... A “180-degree body swerve.”
“Funny-money forecasts”... “ Sheer brazen cheek”.... A “180-degree body swerve.”
Just a few highlights from our expert panel’s verdict - read it all here.
Just a few highlights from our expert panel’s verdict - read it all here.
George Osborne's spending review – our writers' verdict | The panel https://t.co/AVOMSgWWd4
George Osborne's spending review – our writers' verdict | The panel https://t.co/AVOMSgWWd4
4.51pm GMT
4.51pm GMT
16:51
16:51
Small print alert: OBR assuming another delay in the roll-out of universal credit
Small print alert: OBR assuming another delay in the roll-out of universal credit
The OBR is assuming there will be another delay in the roll-out of universal credit. This is from the OBR’s report.
The OBR is assuming there will be another delay in the roll-out of universal credit. This is from the OBR’s report.
We have added our own forecast judgement of a further six-month delay to the managed migration phase of the [universal credit, or UC] rollout. As usual, we have considered evidence from DWP and the latest assessment of UC rollout by the Major Projects Authority. While this indicates greater confidence in the ‘transition phase’ rollout plan, considerable uncertainty remains over the ‘managed migration’ phase. And of course the transition phase rollout schedule has just been pushed back six months, just a year after the previous delay.
We have added our own forecast judgement of a further six-month delay to the managed migration phase of the [universal credit, or UC] rollout. As usual, we have considered evidence from DWP and the latest assessment of UC rollout by the Major Projects Authority. While this indicates greater confidence in the ‘transition phase’ rollout plan, considerable uncertainty remains over the ‘managed migration’ phase. And of course the transition phase rollout schedule has just been pushed back six months, just a year after the previous delay.
And this chart hightlights all the delays that have already occurred. (The line on the left shows what was originally meant to happen, and the lines on the right are the most recent forecasts.)
And this chart hightlights all the delays that have already occurred. (The line on the left shows what was originally meant to happen, and the lines on the right are the most recent forecasts.)
4.42pm GMT
4.42pm GMT
16:42
16:42
Relieved that (most) tax credits aren’t being cut? Or perhaps you work in a public service whose budget is being cut - or a company being hit by the Apprentice’s Levy?
Relieved that (most) tax credits aren’t being cut? Or perhaps you work in a public service whose budget is being cut - or a company being hit by the Apprentice’s Levy?
Whatever the case, we’d like to hear how the spending review will affect your life:
Whatever the case, we’d like to hear how the spending review will affect your life:
Related: How will you be affected by George Osborne's spending review?
Related: How will you be affected by George Osborne's spending review?
Updated
Updated
at 4.48pm GMT
at 4.48pm GMT
4.37pm GMT
4.37pm GMT
16:37
16:37
Small print alert: Not all tax credit cuts reversed
Small print alert: Not all tax credit cuts reversed
Not all of the tax credit cuts announced in the summer are being abandoned. The Treasury is still going ahead with a cut to the “income rise disregard” - the amount of extra a tax credit claimant can earn before losing benefits. In July Osborne announced that this was being cut from £5,000 to £2,500. That cut still applies, and it raises £170m.
Not all of the tax credit cuts announced in the summer are being abandoned. The Treasury is still going ahead with a cut to the “income rise disregard” - the amount of extra a tax credit claimant can earn before losing benefits. In July Osborne announced that this was being cut from £5,000 to £2,500. That cut still applies, and it raises £170m.
4.30pm GMT
4.30pm GMT
16:30
16:30
Moody’s, which stripped the UK of its AAA credit rating in 2013, has warned that Britain still faces a big fiscal challenge.
Moody’s, which stripped the UK of its AAA credit rating in 2013, has warned that Britain still faces a big fiscal challenge.
Kathrin Muehlbronner, senior vice president at Moody’s Investors Service, says:
Kathrin Muehlbronner, senior vice president at Moody’s Investors Service, says:
“While the autumn statement does not fundamentally change our overall view on the UK’s public finances, it again underlines the challenges the government faces in reducing the UK’s large budget deficit and doing so predominantly via spending cuts in a relatively small part of government spending.“
“While the autumn statement does not fundamentally change our overall view on the UK’s public finances, it again underlines the challenges the government faces in reducing the UK’s large budget deficit and doing so predominantly via spending cuts in a relatively small part of government spending.“
“We still believe that the government will manage to gradually improve its public finances and bring the public debt on a declining trend. That said, the OBR now forecasts a deficit of 2.5% of GDP in 2016/17, compared to 2% of GDP just eight months ago. This is partly due to the statistical reclassification of the housing associations into the public sector, but it also reflects higher departmental spending as some of the planned spending cuts, in particular the tax credit cuts, have been withdrawn.”
“We still believe that the government will manage to gradually improve its public finances and bring the public debt on a declining trend. That said, the OBR now forecasts a deficit of 2.5% of GDP in 2016/17, compared to 2% of GDP just eight months ago. This is partly due to the statistical reclassification of the housing associations into the public sector, but it also reflects higher departmental spending as some of the planned spending cuts, in particular the tax credit cuts, have been withdrawn.”
Moody’s isn’t alarmed by those spending changes, though - as it already expected the government to impose its cuts more slowly than planned.
Moody’s isn’t alarmed by those spending changes, though - as it already expected the government to impose its cuts more slowly than planned.
4.28pm GMT
4.28pm GMT
16:28
16:28
Here are all of Deloitte's #Autumnstatement #spendingreview comments https://t.co/gWYGWST9zc
Here are all of Deloitte's #Autumnstatement #spendingreview comments https://t.co/gWYGWST9zc
4.20pm GMT
4.20pm GMT
16:20
16:20
Labour insiders are briefing that John McDonnell’s Little Red Book moment was a humorous aside, in case anyone was confused.
Labour insiders are briefing that John McDonnell’s Little Red Book moment was a humorous aside, in case anyone was confused.
Labour aides stress McDonnell's Mao quote obviously a joke and all part of Commons theatrics. The book idea came out of group discussions
Labour aides stress McDonnell's Mao quote obviously a joke and all part of Commons theatrics. The book idea came out of group discussions
They may be rattled by that Conservative attack note, outlining Mao’s record.
They may be rattled by that Conservative attack note, outlining Mao’s record.
Tory Central Office has just sent round an attack briefing note on Chairman Mao. Apparently he was a very bad man.
Tory Central Office has just sent round an attack briefing note on Chairman Mao. Apparently he was a very bad man.
SCENE: CCHQ, August: Staffer 1: You busy? Staffer 2: Just polishing the Mao file. S1: Really? S2: You never know. https://t.co/S0Ap6WWJgb
SCENE: CCHQ, August: Staffer 1: You busy? Staffer 2: Just polishing the Mao file. S1: Really? S2: You never know. https://t.co/S0Ap6WWJgb
4.17pm GMT
4.17pm GMT
16:17
16:17
Labour says Short money cut is anti-democratic, partisan and unfair
Labour says Short money cut is anti-democratic, partisan and unfair
Labour has strongly criticised the decision to cut Short money. (See 3.11pm.) This is from a party spokesman.
Labour has strongly criticised the decision to cut Short money. (See 3.11pm.) This is from a party spokesman.
This is another anti-democratic move by the Tories. Having already attacked the rights of working people they’re now coming forward with partisan moves to hit their opposition and give themselves another unfair advantage. If the Tories were really serious about cutting the cost of politics they would start with the bill for Tory special advisers which has rocketed under David Cameron.
This is another anti-democratic move by the Tories. Having already attacked the rights of working people they’re now coming forward with partisan moves to hit their opposition and give themselves another unfair advantage. If the Tories were really serious about cutting the cost of politics they would start with the bill for Tory special advisers which has rocketed under David Cameron.
Labour says the bill for government special advisers rose by 35% to £8.4m from 2011-12 to 2013-14, the last year for which figures are available.
Labour says the bill for government special advisers rose by 35% to £8.4m from 2011-12 to 2013-14, the last year for which figures are available.
4.09pm GMT
4.09pm GMT
16:09
16:09
Average earnings have been revised down partly because the OBR thinks that the apprenticeship levy means firms will have less money for pay rises. This is from the OBR’s report.
Average earnings have been revised down partly because the OBR thinks that the apprenticeship levy means firms will have less money for pay rises. This is from the OBR’s report.
We have revised average earnings growth lower relative to our July forecast. That partly reflects small adjustments to our productivity growth forecast, but also an assumption that the ongoing costs of auto- enrolment and the introduction of an apprenticeship levy will weigh on earnings growth. These are both economically equivalent to payroll taxes, so – consistent with evidence on the incidence of such taxes – we assume that most of the cost will ultimately be borne by employees. Together, auto-enrolment and the new apprenticeship levy reduce cumulative wage growth over the forecast period by 0.7 per cent. This estimate relies on assumptions about how firms respond to such changes, so is subject to considerable uncertainty.
We have revised average earnings growth lower relative to our July forecast. That partly reflects small adjustments to our productivity growth forecast, but also an assumption that the ongoing costs of auto- enrolment and the introduction of an apprenticeship levy will weigh on earnings growth. These are both economically equivalent to payroll taxes, so – consistent with evidence on the incidence of such taxes – we assume that most of the cost will ultimately be borne by employees. Together, auto-enrolment and the new apprenticeship levy reduce cumulative wage growth over the forecast period by 0.7 per cent. This estimate relies on assumptions about how firms respond to such changes, so is subject to considerable uncertainty.
3.59pm GMT
3.59pm GMT
15:59
15:59
Small print alert: Average earnings revised downwards
Small print alert: Average earnings revised downwards
And the OBR report also shows that average earnings have been revised downwards for the next five years (by 0.2% in 2016, then 0.2%, then 0.3%, then 0.4%, and then 0.4%).
And the OBR report also shows that average earnings have been revised downwards for the next five years (by 0.2% in 2016, then 0.2%, then 0.3%, then 0.4%, and then 0.4%).
3.56pm GMT
3.56pm GMT
15:56
15:56
Back at the OBR briefing, Robert Chote has outlined how the government’s Apprentice Levy will drag wages down this decade:
Back at the OBR briefing, Robert Chote has outlined how the government’s Apprentice Levy will drag wages down this decade:
OBR on impact of various measures on the economy pic.twitter.com/wKyGiRgDNq
OBR on impact of various measures on the economy pic.twitter.com/wKyGiRgDNq
OBR concluding points pic.twitter.com/oo6MsVg6iU
OBR concluding points pic.twitter.com/oo6MsVg6iU
3.55pm GMT
3.55pm GMT
15:55
15:55
Small print alert: Household disposable income revised down
Small print alert: Household disposable income revised down
According to the OBR, the level of real household disposable income has been revised down for 2015 by 0.5%. That means the OBR thinks we have had less money to spend this year than it previously assumed.
According to the OBR, the level of real household disposable income has been revised down for 2015 by 0.5%. That means the OBR thinks we have had less money to spend this year than it previously assumed.
3.48pm GMT
3.48pm GMT
15:48
15:48
Hunt agrees to go to ACAS for talks to try to avert junior doctors' strike
Hunt agrees to go to ACAS for talks to try to avert junior doctors' strike
We’ve had two U-turns from the government today - on tax credits, and police funding.
We’ve had two U-turns from the government today - on tax credits, and police funding.
And now there’s a third. It is not strictly autumn statement-related, but if you’ve got something embarrassing to announce, why now sneak it out when the nation’s journalists are already working flat out on a budget-scale event. “Burying bad news” it used to be called.
And now there’s a third. It is not strictly autumn statement-related, but if you’ve got something embarrassing to announce, why now sneak it out when the nation’s journalists are already working flat out on a budget-scale event. “Burying bad news” it used to be called.
Jeremy Hunt, the health secretary, has been resisting calls to go to Acas, the conciliation service, for talks to avert the junior doctors’ strike. The BMA and Labour have been pushing for this, but Hunt said he want the BMA to talk to him first.
Jeremy Hunt, the health secretary, has been resisting calls to go to Acas, the conciliation service, for talks to avert the junior doctors’ strike. The BMA and Labour have been pushing for this, but Hunt said he want the BMA to talk to him first.
Now, though, the Department of Health has agreed to go to ACAS.
Now, though, the Department of Health has agreed to go to ACAS.
Department of Health: Government has agreed to talks at Acas in a bid to avoid strike action by members of the British Medical Association
Department of Health: Government has agreed to talks at Acas in a bid to avoid strike action by members of the British Medical Association
3.47pm GMT
15:47
Martin Lewis, founder of MoneySavingExpert.com, is absolutely furious that the government is freezing the student loan repayment threshold, and not uprating it in line with earnings.
He says:
“This is a disgraceful move and a breach of trust by the government that betrays a generation of students. It has chosen to freeze the repayment threshold even though 95% of the consultation responses did not support the freeze - what was the point of a consultation if when there’s huge objection it does it anyway?
According to Lewis, the freeze means 2 million graduates will end up paying £306 more each year by 2020-21 than they would have done without the change.
(students must repay 9% of everything they earn above £21,000 (pre-tax salary) once they graduate)
Lewis also accuses George Osborne of cowardice, for not mentioning the change in his statement:
“It is risking fundamentally threatening any trust people have in the student finance system. It is one thing to set up a system that is unpopular but it is entirely different to make retrospective changes that mean you cannot even rely on what you were promised at the time you started to study. Even though it was warned of the huge dangers of doing this, it’s still blundering ahead, ignoring all right thinking concern.
“The fact that the Chancellor didn’t even have the balls to put it in his Autumn Statement speech shows that he knew how unpopular it would be. If a commercial company made retrospective changes to their loan terms in this way they’d be slapped hard by the regulator – the Government shouldn’t be allowed to get away with it either.
3.38pm GMT
15:38
Small print alert: Student loan repayment threshold frozen
The government has quietly announced that it is hitting students in the pocket, by not raising the threshold for repaying their loans.
The BIS department says:
To reduce government debt, the student loan repayment threshold for Plan 2 borrowers will be frozen until April 2021.
Plan 2 borrowers are those who took out loans from 2012 onwards. Previously, the threshold for repayments was meant to rise in line with earnings.
Govt just announced (snuck out?) change which means current students will pay significantly more in loan repayments https://t.co/pCyuvvMZly
Labour MP Wes Streeting (a former president of the National Union of Students) says it’s a betrayal, given the government consulted about the move:
Agreed. Regard this as a personal betrayal of those graduates and work we did for Willetts on independent info https://t.co/QdxgbWOLAe
The Government consulted on freezing student loan repayment threshold. 84% opposed it; the Govt went ahead anyway. pic.twitter.com/ZPoUfgOI1C
Updated
at 3.41pm GMT
3.37pm GMT
15:37
And here is a Guardian video with Osborne’s best jokes.
3.31pm GMT
15:31
They don’t miss a trick at CCHQ. Someone has been busy with Wikipedia, and the Tories have just sent out a full-page briefing note about the evils of Chairman Mao, including the claim that 45m Chinese died during the famine caused by Great Leap Forward.
Here is the John McDonnell moment they are referring to.
Updated
at 3.36pm GMT
3.24pm GMT
15:24
Robert Chote, head of the Office for Budget Responsibility, is briefing the media now:
At OBR briefing, Robert Chote says not much change to economic outlook pic.twitter.com/iRraKW7GTF
OBR's Chote says income taxes and corporation taxes have come in stronger than we expected and that pushes through the forecast
Obr's Chote: public services spending is on less of a rollercoaster than March and less of a bumpy road than in July pic.twitter.com/J3fHCVbf26
3.24pm GMT
15:24
The BBC has taken the unusual step of resorting to Twitter to invite anyone from Labour to appear on the autumn statement programme. Laura Kuenssberg, the BBC’s political editor, says they don’t know whether John McDonnell will turn up.
Any Labour frontbencher fancy coming on to the studio? we dont' know if @johnmcdonnellMP is going to turned up as planned
3.21pm GMT
15:21
Small print alert: New stamp duty rate covers second homes as well as buy to let
George Osborne announced a new top-up stamp duty, 3% above the current rate, for people buying homes for buy to let. Bad news, if you’ve got the money and plan to splash; the new rate will cover all second homes, not just ones that are being let.
This new levy will raise £625m next year, rising to £880m by the end of the parliament.
According to the Telegraph’s Christopher Hope, unmarried couples will be able to avoid this.
*Unmarried* couples will be able to avoid new tax on second homes by putting properties in their different names, Treasury officials say
3.21pm GMT
15:21
The CBI is also concerned that businesses are being squeezed too hard:
CBI: "Business recognises there are tough choices to be made in balancing the books, but many are reaching a tipping point"
3.17pm GMT
15:17
Business balks at Apprentice Levy
The Institute for Directors has sounded the alarm about the government’s new Apprentice Levy.
This new scheme puts a tax on firms’ payroll — to fund Britain’s apprenticeship system.
Simon Walker, Director General of the IoD, isn’t impressed:
“The major business tax announcement of this Autumn Statement was the Apprenticeship Levy, which can only be described as a new payroll tax. At 0.5% of payroll it will be a big new cost for many companies, including medium-sized ones. We are very concerned by the Government’s assumption that a quarter of the money collected will be spent on just administering the levy.
Firms have been promised they will get back more than they put in, but it’s not clear how this will happen if so much is being lost in bureaucracy.
As flagged earlier, the Levy is expected to raise more than £11bn.
And the Office for Budget Responsibility has predicted it will lead to “lower nominal wages and profit margins” -- bad news for workers and shareholders.
That’s pretty significant for a major retailer such as Tesco:
So Osborne wants Tesco, which has 310,000 UK workers, to raise minimum wage to £9 and then pay 0.5% of total staff cost for apprentices
3.11pm GMT
15:11
Small print alert: Funding for opposition parties to be cut
It is often claimed that we don’t have state funding for political parties in the UK. But we do, on a modest level, because opposition parties get so-called Short money (named after Ted Short, a former leader of the Commons) to fund what they do in parliament. Currently this is worth more than £6m a year to Labour, and more than £1m a year to the SNP. All political parties can also get policy development grants, which add up to another £2m a year in total.
This money is now being cut. The Tories will lose a bit through the changes to policy development grant funding, but Labour will be hit the hardest. This is from the autumn statement document.
Therefore, subject to confirmation by Parliament, the government proposes to reduce Short Money allocations by 19%, in line with the average savings made from unprotected Whitehall departments over this Spending Review. Allocations will then be frozen in cash terms for the rest of the Parliament, removing the automatic RPI indexation. Policy Development Grant allocations will also be reduced by a similar proportion, ensuring that political parties in receipt of taxpayer-funding contribute to the savings being asked of local and central government.
3.08pm GMT
15:08
Small print alert: London bears brunt of transport cuts, but HS2 survives
Transport has been dealt the biggest cut of any government department as a proportion of its day-to-day spending, with 37% slashed from the DfT’s resource budget by 2020, reports our transport correspondent Gwyn Topham.
Most of the savings will come from London. Transport for London’s operational budget of almost £700m a year will be entirely wiped out by the end of the decade, leaving TfL to fund its services through commercial investment, cuts or potentially higher fares.
But the chancellor said that transport cuts would be offset by money earmarked for infrastructure funding, up 50% from the last parliament to £61bn over the next six years, including 2020-21.
Much of the later spending will go on HS2 - whose price tag has been officially increased to £55.7bn at 2015 prices. Road building will account for £15bn in spending, which George Osborne hailed as the largest road investment programme since the 1970s.
London will still receive a total £11bn to continue upgrades and new infrastructure, including Crossrail.
The chancellor said the increased capital budget would ensure that critical rail projects such as the electrification of the Midland mainline and Transpennine route can go ahead, after they were shelved earlier this year to outcry in the north. The DfT forecasts that rail franchising will deliver bigger returns to the Treasury than it currently receives.
The DfT’s budget will fall from £2.6bn this year to £1.8bn in 2019-20. Its departmental administration budget will be cut by 12% in real terms, a slightly less severe cut than the 18% average across government.
3.01pm GMT
15:01
Damian Carrington
The most startling hit for energy and environment in the spending review is £132m pulled from energy efficiency schemes, announced on the day that a huge leap in winter deaths was revealed, says our environment editor Damian Carrington.
Osborne sold the change as a £30 cut to consumer bills, but customers in leaky homes will pay much more in the long run.
The chancellor also slashed 40% - £700m - from a scheme backing green heating systems, lowering the chances the UK can hit its climate change targets. Meanwhile, heavy industrial energy users got a £20m exemption from green taxes.
But Osborne, known as a technology geek, also announced “at least £250m over the next five years in an ambitious nuclear research and development programme that will revive the UK’s nuclear expertise”. This will include a competition to identify the best value “small modular reactor design” - mini-nuke - for the UK, which Osborne said would pave the way to building one of the world’s first SMRs in the UK in the 2020s.
The £2bn Osborne announced for flood defences is not new and the £1bn Shale Wealth Fund remains theoretical, as no fracking has yet happened. Both the Department of Energy and Climate Change (DECC) and the Department for Environment, Food and Rural Affairs have taken heavy cuts to day-to-day spending, meaning job losses. For DECC in particular, this is likely to undermine the government’s ability to get the best value for taxpayers in deals with the private sector, such as subsidies for expensive future nuclear power plants.
2.59pm GMT
14:59
Andy Burnham, the shadow home secretary, claims the decision to protect police budgets is a win for Labour (which has been campaigning on this.) But he says it is not quite as generous as Osborne implied, because police budgets will be protected in cash terms but not in real (ie, inflation adjusted) terms.
But, as ever with Osborne, small print tells different story. Spending Review document says Police forces in line for real-terms cuts. #spin
By holding individual force budgets at cash levels (not real-terms), looks like Osborne has accepted Labour's position in full. A major win.
UPDATE: The Treasury says that is not true. The autumn statement document says:
The government will protect overall police spending in real terms over the spending review period, an increase of £900m in cash terms by 2019-20.
Updated
at 5.46pm GMT
2.57pm GMT
14:57
someone caught Cameron sneaking a cheeky sweet during the #spendingreview pic.twitter.com/0M4ANZPS6G (via @SaltyPerson)
2.53pm GMT
14:53
Frank Field, the Labour MP who chairs the work and pensions committee and who led opposition to the tax credit cuts, is claiming that some families claiming the new universal credit could still lose more than £2,000, the BBC reports.
Frank Field, key opponent of tax credit change says strivers with kids who claim Univl Credit will be worse off next year by up to £2,629
2.49pm GMT
14:49
Small print alert: OBR gets VAT take wrong
Britain’s fiscal watchdog has admitted that it has underestimating the amount of money brought in through VAT.
It has changed the way it models VAT deductions, providing an extra £400m this year - rising to £3.3bn (!) by 2020.
Here's the #AutumnStatement magic, ladies and gentlemen. A £3.3bn boost in VAT receipts from modelling changes (1/4) pic.twitter.com/laLRYc1tuF
The OBR has also changed its modelling for national insurance take, and again, they work out in the government’s favour - with an extra £2.8bn coming in by 2020.
Over course of this Parliament there are £29.1bn extra tax receipts from "modelling changes" #AutumnStatement (3/4) pic.twitter.com/FiPpMjMACG
2.48pm GMT
14:48
Here’s John McDonnell quoting Mao’s Little Red Book.
In case you missed John McDonnell quoting the Great Helmsman https://t.co/kaeoCTh3kS #spendingreview
2.41pm GMT
14:41
IFS on how Osborne could fund his announcements
Paul Johnson, director of the Institute for Fiscal Studies, has just been on the BBC explaining how George Osborne has been able to fund his surprise “good news” announcements. Asked if the sums were credible, Johnson said:
[Osborne] has got a bit lucky, in that there are some more tax revenues expected to come in by the OBR. And he’s got a bit lucky because he’s going to be a spending a bit less on debt interest. He has also increased taxes reasonably significantly. There’s a £3bn impost on business to pay for the new apprenticeships. And there are some increases in council tax, probably. And there are some other tax increases there.
So he’s done two things. He has taken advantage of increased revenues and reduced spending on debt interest. He’s increased taxes a bit. And he’s essentially used most of that money to damp down the cuts in spending. And because those cuts in spending were on a relatively limited part of government, the effect of that bit of extra money is to significantly reduce the overall level of cuts.
2.31pm GMT
14:31
The OBR has revised up its forecast for income tax and national insurance contributions this parliament by almost £15bn.
That has helped to chancellor to stick to his deficit reduction targets despite raising spending - so there could be problems if they’re wrong...
increase in income tax projections, which OBR has overestimated before (but Osborne has spent £££ in the mean time) pic.twitter.com/nNAGXGl5GM
2.27pm GMT
14:27
Small print alert: Welfare cap to be breached three years running
It’s official, the cap doesn’t fit.
The Office for Budget Responsibility has predicted that the government will fall into its welfare cap trap several times.
It says:
Our central forecast shows that the terms of the welfare cap are set to be breached in three successive years from 2016-17 to 2018-19, with the net effect of policy measures raising welfare cap spending in each of those years, and to well above the 2 per cent forecast margin in 2016-17 and 2017-18.
The terms of the cap are set to be observed by very small margins in 2019-20 and 2020-21, with spending above the cap but within the forecast margin and with the net effect of measures in those years reducing spending.
2.21pm GMT
14:21
Small print alert: Gross tax take up by £28.5bn
The OBR has calculated that today’s measures will raise gross tax take by £28.5bn by 2020.
It says:
These include the new apprenticeship levy (£11.6 billion), higher council tax (£6.2 billion), and the introduction of higher rates of stamp duty land tax for second homes and buy-to-let purchases (£3.8 billion).
That’s a major tax hit on businesses, who are being forced to take on the cost of creating millions of extra apprentices.
Apprenticeships Levy raises £3 billion a year - epic tax rise on business
This chart shows how tax changes (in yellow) will pull down the deficit, while public spending changes (in grey) will push it up (as well the u-turn on tax credits).
Updated
at 2.23pm GMT
2.20pm GMT
14:20
Severin Carrell
Today’s detailed forecasting by the OBR has some grim news for John Swinney, the Scottish finance secretary, by warning that income from taxes controlled by the Holyrood parliament in Edinburgh are likely to be lower than it thought.
Raising fresh questions about the Scottish government’s future finances, the OBR forecasts that tax income from Swinney’s flagship replacement for stamp duty, introduced on new house sales earlier this year, will be 20% lower over the next six years than it predicted in July.
The OBR estimates revenues from the new land and buildings transaction tax (LBTT) will be £926m lower by 2021, contributing directly to a £485m fall in overall tax receipts for the Scottish government compared to the OBR’s forecast in July.
Holyrood will start to take nearly complete control over income tax in Scotland from April 2016 – helping it raise some £6bn a year by 2021. But the OBR now believes that based on current tax rates, Scotland’s income tax receipts will only rise by 0.7% compared to its July forecast.
2.12pm GMT
14:12
John McDonnell's speech - Verdict from the Twitter commentariat
Here is a quick round-up of what political journalists and writers are saying about John McDonnell on Twitter. Mostly they are not complimentary.
(The consolation for McDonnell is that it does not really matter. Almost all the media focus today will be on Osborne.)
From the Times’s Patrick Kidd
"Bring back Ed Balls" shouts a Tory but McDonnell making a decent fist of it given he is speaking on something he hadn't previously seen
From the Daily Mail’s Jason Groves
McDonnell a bag of nerves responding to spending review. Stumbling over words + gulping for air. Good hit on welfare cap, but struggling now
From the Guardian’s Rafeal Behr
Chris Leslie, Yvette Cooper scouring CSR small print on backbenches. Reminder that McDonnell never done rapid budget reaction. Others have.
From Sky News’s Faisal Islam
McDonnell overachieving against expectations here - on his debut in a tough situation
From the Spectator’s Isabel Hardman
I don't think it would matter whether McDonnell gave a spectacular response to this. Most Labour MPs are horrified he's even doing it.
From the FT’s Jim Pickard
McDonnell is waving around Mao's little red book - apparently oblivious to the signal this sends out.
From the author Robert Harris
I would say this McDonnell speech is worst response from the dispatch box I have ever seen. Dire.
From Newsnight’s Allegra Stratton
Labour response now from @johnmcdonnellMP shows why CX felt he cd get away with double U turn. Couldn't make capital out of tax credit win
2.11pm GMT
14:11
OBR: Net giveaway of £6.2bn
The Office for Budget Responsibility confirms that it has raised its forecast for tax receipts, allowing George Osborne to ease back on austerity.
In the first combined Spending Review and Autumn Statement since 2007, the Government has taken advantage of an improvement in the outlook for tax receipts – concentrated in the middle years of this Parliament – to further loosen the impending squeeze on public services spending, to increase capital spending and to reverse the main tax credit cuts it announced in July, while still delivering a modestly stronger budget balance in most years on a like-for- like basis. As the boost to receipts begins to ebb, the Government increases departmental spending by less and relies more on tax increases to maintain the bottom line improvement.
There is still a major squeeze on departments, though -- Osborne’s latest cuts are roughly than a third smaller on average than those delivered over the last Parliament.
But in aggregate, the OBR says the chancellor is actually spending more than he’s getting in from the improved fiscal outlook:
Taken together with the other measures in the Autumn Statement, the Government has announced a net fiscal giveaway of £6.2 billion next year, more than half of which is the cost of reversing the tax credit cut. This outweighs a £2.9 billion improvement in the underlying forecast in that year and thereby pushes up the deficit.
In his 1st term, OBR lifted its borrowing forecasts, forcing GO into more austerity. Now, in his 2nd term, opposite seems to be happening
2.01pm GMT
14:01
McDonnell is still speaking. He says this statement was part of Osborne’s leadership bid.
The statement will be seen as the apex of Osborne’s career, he says.
He describes Osborne as Icarus - flying too close to the sun.
He says Labour’s advocates investment instead. It wants high skills, high investment, and high wages. That is what Labour will secure when it returns to office, he says.
And that McDonnell response is over.
1.58pm GMT
13:58
John McDonnell's response to Osborne
John McDonnell, the shadow chancellor, is responding to George Osborne now. Having to respond to statements of this kind is the hardest task any parliamentarian ever has to undertake (because the opposition gets no advance warning of what is in these statements) and no one ever really triumphs in this role.
McDonnell started by taunting Osborne for the fact that he failed completely to cut the deficit in one parliament as he promised in 2010. McDonnell’s argument was sound, although his attempt to lecture the Tories on deficit reduction and economic credibility prompted laughing from the government benches.
McDonnell is going through cuts in the announcement now. He says that he Department for Business is almost being closed down, and that the solar energy industry is being killed off.
He says he never expected to be outdone in nationalisation by Osborne. He says he, McDonnell, wants to nationalise rail. But Osborne wants to sell British assets to Chinese state companies.
McDonnell brandishes a copy of Mao’s Little Red Book, and he quotes from it: “We must learn to do economic work from all, no matter who they are.” He thought this advice would come in handy for Osborne, McDonnell says.
He says this is not an economic plan but a political fix.
Updated
at 2.24pm GMT
1.57pm GMT
13:57
The Office for Budget Responsibility’s new Economic and fiscal outlook is online too. Now we can see the details of today’s figures....
Economic and fiscal outlook – November 2015
1.49pm GMT
13:49
The Spending Review and Autumn Statement are online here.
1.49pm GMT
13:49
Political snap summary - Real surprises, a deft U-turn and two leaps into Labour territory
Andrew Sparrow
John McDonnell has just stood up to respond to George Osborne. He has got quite a task, because there were some genuine political surprises there, as well as at least two leaps into Labourish territory. Quite how Osborne will fund his “good news announcements” is a total mystery, on the basis of what Osborne said, but after a few hours with the red book we should find out. But Osborne does probably deserve some credit for abandoning his tax credits completely, instead for opting for a fudge. If you are going to do a U-turn, you may well do one properly, and Osborne pulled this off with some aplomb. His announcement on police funding was a real surprise too (although we need to see the small print). More interesting were the apprenticeship levy - a £3bn tax on big business, not unlike Gordon Brown’s 1997 windfall tax, and more ambitious than anything Labour proposed at the election - and the punitive 3% stamp duty for buy to let landlords, another move that sounds Jeremy Corbyn than Ed Balls.
1.48pm GMT
13:48
1.43pm GMT
13:43
Here’s Heather Stewart on today’s Autumn Statement:
George Osborne has executed a complete U-turn on his controversial cuts to tax credits, as he delivered what he called, “a big spending review from a government that does big things”.
Osborne had promised to modify the plans, which would have seen 3m low-income families lose an average of £1,000 a year, after they were rejected by the House of Lords, and criticised by Conservative backbenchers.
Delivering his combined autumn statement and spending review, the chancellor said higher than expected tax revenues and lower interest payments on government debt had opened up an extra £27bn of fiscal wriggle-room, which would allow him to cancel the £4.4bn cuts altogether.....
Related: George Osborne scraps tax credit cuts in welfare U-turn
Updated
at 1.46pm GMT
1.40pm GMT
13:40
Economic snap summary: Better than feared
Graeme Wearden
You always expect a few white rabbits from George Osborne.
But this time, the Office for Budget Responsibility handed the chancellor a plump bunny, with better growth forecasts despite recent signs of weakness in the global economy.
And that means the chancellor has wrong footed City economists who expected slightly worse deficit figures today.
Low global interest rates have probably cut the bill for servicing the national debt. The OBR must also be more optimistic about tax receipts - despite the surprise fall in October. That adds up to an unexpected windfall for the chancellor, allowing him to stick to that surplus target in this parliament and also avoid cuts to the police. But the axe has still swung elsewhere.
Big news: no police cuts. #AS2015
The OBR are releasing its latest economic and fiscal forecasts now, so we’ll soon be able to see the details [it’s also complicated by reclassifications to the national debt]. Past history shows that the statement may look less rosy under closer examination....
The spending cuts outlined today mean the chancellor is persevering with a Thatcher-style reshaping of the UK economy, cutting the state:
Thatcher left office with spending/GDP 6.4% lower than when she arrived. Osborne will hit 6% in 2015.#spendingreview pic.twitter.com/J6VlnxtH5K
And while the the tax credit u-turn will be welcomed by poorer workers, let’s not forget that pensioners can also look forward to more money - thanks to the ‘triple-lock’.
Updated
at 1.50pm GMT
1.38pm GMT
13:38
Osborne says the Tories were elected as one nation government. And they are governing as such, he says, as “the mainstream representatives of the working people of Britain”.
1.37pm GMT
13:37
Police budgets to be protected
Osborne says the counter-terrorism budget is going up 30%.
Osborne says some people have said police budgets should be cut by 10%. (This is a reference to Andy Burnham, the shadow home secretary, who said the police could live with cuts of 10%.)
But he disagrees, he says.
Osborne says the police protect us, so we will protect them.
1.37pm GMT
13:37
Is the party over for buy-to-let landlords? Newsnight’s Duncan Weldon suggests so:
That seems like a big hit to the buy to let sector. #spendingreview
Updated
at 1.37pm GMT
1.36pm GMT
13:36
Conservative backbencher David Davis (former shadow home secretary) has also given Osborne the thumbs-up:
David Davis on tax credits U-turn: brilliant news, chancellor to be congratulated for listening to concerns of b'benchers and voters
1.35pm GMT
13:35
Osborne turns to security.
It is in the national interest to spend on aid, he says.
1.34pm GMT
13:34
Osborne turns to house building. Some details of his plans emerged overnight.
He says he wants to do much more than in the past.
We are the builders, Osborne says, using the slogan he used in his party conference speech.
1.29pm GMT
13:29
Osborne says under-used courts will be closed. The £700m saved will be used to introduce new technology into the court service.
Nine new prisons to be built.
Holloway prison, the biggest women’s prison in Western Europe, will close, he says. The women will serve their time in more modern prisons.
1.28pm GMT
13:28
Apprenticeship levy to raise £3bn a year
Osborne turns to apprenticeships.
1.26pm GMT
13:26
1.25pm GMT
13:25
Osborne says the arbitrary schools funding system will be replaced.
He commends MPs from all parties who have campaign for this.
1.24pm GMT
13:24
Osborne says sixth form colleges will be able to become academies, so they do not have to pay VAT.
Councils running schools will become a thing of the past.
Schools funding will increase by £10bn.
1.23pm GMT
13:23
Osborne says free school meals and the pupil premium will be maintained.
He says the national citizen service will be expanded. By the end of the decade, there will be places for 300,000 students.
1.22pm GMT
13:22
Osborne says the government is making the largest ever investment in free childcare. It will be available from 2017. But it will only be available to families working a certain number of hours per week.
1.22pm GMT
13:22
The Shadow Secretary of State for Work and Pensions, Owen Smith, warns that low-income households on Universal Credit are still vulnerable:
Let's be clear: the tax credit reverse is a victory - but the 140k families already on UC will still suffer the full cut 1/2
And all families that would newly qualify for Tax Creds in 2018 will suffer the full cut under UC - so this is not the full & fair reversal
1.21pm GMT
13:21
Osborne says sound public finances can help the most disadvantaged.
Inequality is down, and child poverty is down, he says.
The other side talks of social justice; the Conservatives deliver it, he says.
1.21pm GMT
13:21
Osborne says this is similar to the way Libor fines are used to help service charities. He names various ones that will benefit from Libor money, including the Winston Churchill Memorial Trust.
And there will be a memorial for the victims of 7/7.
1.20pm GMT
13:20
Osborne says there are many charities that support vulnerable women.
Some 300,000 people have signed a petition calling for the removal of the tampon tax.
The government wants to change EU law so it can abolish that altogether.
But, until then, the £15m raised from the tax will go to women’s charities, he says.
1.18pm GMT
13:18
Osborne says cuts in arts funding are a false economy.
The DCMS’s administrative budget will be cut by 20%.
But the Arts Council’s budget will be protected, and free museum entry will be maintained.
He says Alan Johnson has lobbied him for money for Hull’s year of culture. He will oblige, he says. He says Johnson has contributed to arts, while his front bench has contributed to comedy.
1.17pm GMT
13:17
Osborne says the Department for Business budget is being cut by 17%.
In the last parliament the budget for science was protected in cash terms. In this parliament it will be protected in real terms, he says.
The Cavendish laboratories in Cambridge will be transformed.
Paul Nurse, a Nobel laureate, has just published a report into research laboratories. Its recommendations will be published.
1.16pm GMT
13:16
Professor Geraint Johnes, Professor of Economics at Lancaster University, tells us:
“New freedoms have been given to councils to realise income generated through sales of property. Useful, but can only be done once.”
1.15pm GMT
13:15
Osborne says the small business rate relief scheme is being extended for another year.
1.14pm GMT
13:14
Osborne says support for climate finance is being increased.
A new energy scheme will save £30 a year from the energy bills of 30m households, he says.
The rules affecting the compensation culture around minor motor industries are changing. That should cut car insurance, he says.
1.12pm GMT
13:12
Osborne says Defra’s budget is falling by 15%.
But there will be £2bn for flood defences.
Mentioning forestry, he says the government will not be making them mistake of trying to privatise them again.
And the government will carry on with the scheme that cuts South West Water bills by £50.
1.11pm GMT
13:11
Osborne says Britain topped the league table of best places in the world to invest in infrastructure spending in a survey last week.
Department for Transport spending will be cut by 37%, he says. But its capital spending will go up by around 50%.
And London will get an £11bn investment in transport infrastructure.
Kent will also get £250m to deal with the problems associated with Operation Stack.
1.11pm GMT
13:11
Mary Ann Seighart, who chairs the Social Market Foundation, isn’t impressed by Osborne’s plan to allow local councils to sell off surplus properties to fund day-to-day spending:
So will councils be allowed to spend capital receipts on current spending? Not very sustainable, that. #spendingreview
1.09pm GMT
13:09
Osborne says he wants a deal for Scotland that is fair and fit to last.
If Scotland had voted for independence, it would have its own spending review this autumn. With oil revenues down by around 90%, there would have been catastrophic cuts. But luckily that was avoided, he says.
1.08pm GMT
13:08
Osborne says Northern Ireland’s block grant will be over £11bn by the end of this parliament.
And he says he is giving a funding floor to Wales, set at 115%. And the government will legislate so the Welsh assembly can get powers over income tax without a referendum.
1.06pm GMT
13:06
Osborne says local government is sitting on property worth £250bn.
So councils will be able to keep 100% of the receipts from the assets they sell, he says.
By the end of this parliament local government will be spending the same in cash terms as it does today.
1.05pm GMT
13:05
Osborne turns to his northern powerhouse vision, and his plans to devolve power to local authorities.
Some 26 new or extended enterprise zones are being created, he says.
As he said at the Tory conference, he is abolishing the uniform national business rates. Power over business rates will be devolved.
1.03pm GMT
13:03
Osborne says the new rate for the basic state pension will be £155.65.
1.02pm GMT
13:02
Osborne says the basic state pension will increase by £3.35 a week next year, to £119.30 a week.
Updated
at 1.03pm GMT
1.02pm GMT
13:02
On Twitter Rupert Harrison, Osborne’s former chief of staff, has explained why Osborne abandoned the tax credit cuts.
After Lords defeat, today's tax credit changes a tribute to GO's favourite rule of politics: you have to know how to count (hat tip LBJ)
Or in other words - if you have a problem, fix it properly... Made possible by growing economy and better public finance forecasts
1.01pm GMT
13:01
Labour MP Alison McGovern, of Wirral South, credits tax credit campaigners:
Need detail but hopefully massive #taxcredits u-turn means bit better Christmas for some of my constituents. Thanks to all who campaigned x
1.01pm GMT
13:01
Osborne turns to social care.
He says he is increasing the better care fund, to help the integration of health and social care.
By the end of this parliament health and social care spending will have risen, he says.
1.00pm GMT
13:00
Osborne turns to mental health, and he praises Andrew Mitchell, Norman Lamb and Alastair Campbell for their campaigning on this.
12.59pm GMT
12:59
Osborne says Simon Stevens, the NHS England chief executive, says the NHS is being funded appropriately.
12.59pm GMT
12:59
One of the Conservative rebels over tax credits, Stephen McPartland of Stevenage, has welcomed the decision to abandon the cuts
Delighted Chancellor has listened and abolished the changes to Tax Credits. The victory is his and I can now return to the fold!!!!!!
12.58pm GMT
12:58
Osborne says the NHS is the first priority of the government, and the British people.
Health spending was cut by the Labour administration in Wales. But under the Tories it is rising in England, he says.
Osborne says there is currently a cap on the number of student nurses. That cap will be abolished, and student nurses will have to apply for loans.
12.56pm GMT
12:56
Osborne says day to day spending in government departments is set to fall by an average of 0.8% a year in real terms.
The government is still spending £4 trillion over the next five years, he says.
12.55pm GMT
12:55
Osborne says the cuts are half what they were in the last parliament.
12.55pm GMT
12:55
Osborne says total managed expenditure - the government’s total spending - will be £756bn this year, rising to £773bn next year, £787bn the year after, £801bn in 2018-19 and £821bn in 2019-20.
12.53pm GMT
12:53
Osborne says government spending was 45% of GDP in 2010.
Now it is just under 40%. But the end of the spending review period it will be down to 36.5%.
At that level it is affordable, he says.
12.52pm GMT
12:52
Osborne turns to tax avoidance measures. The government will build one of the most digitally advanced tax systems in the world.
Everyone will have digital tax accounts by the end of this parliament, he says.
And that means capital gains tax will have to be paid quickly.
The cost of Whitehall administration will be cut by £1.9bn, he says.
12.50pm GMT
12:50
Osborne turns to the deficit forecast.
12.50pm GMT
12:50
#taxcredit taper rate and thresholds to remain unchanged #SpendingReview
12.48pm GMT
12:48
Osborne abandons tax credit cuts
Osborne says he can help with tax credits.
People have argued the cuts should be phased in.
But the simplest thing is to avoid them altogether.
Updated
at 1.21pm GMT
12.46pm GMT
12:46
Osborne says he has cut his borrowing plans by £8bn.
And he will be able to achieve a surplus by cutting less, he says.
12.45pm GMT
12:45
12.44pm GMT
12:44
OBR growth forecast: basically no big change, UK grows at trend for next 5 years.
12.43pm GMT
12:43
Osborne says housing associations have been brought onto the public balance sheet.
That statistical change will be backdated to 2008.
The OBR has produced new forecasts.
Debt was meant to be 83.6% this year, he says. On the new measure, it is 82.5%, he says.
12.43pm GMT
12:43
Those growth forecasts mean the UK should grow a little faster than expected in the next two years, before slowing towards the end of the decade:
12.42pm GMT
12:42
Osborne says he is still committed to delivering a surplus in 2019-20. The OBR has approved the forecast.
12.42pm GMT
12:42
Osborne says Labour claims about the government plans have been proved wrong.
The OBR says the economy will grow robustly every year, and living standards will rise every year.
12.41pm GMT
12:41
Osborne reads out the growth forecast.
12.39pm GMT
12:39
Osborne says the OBR says debts are too high, and the deficit remains.
Expectations for world growth and world trade have been revised down.
That is why it is important to protect economic security.
12.38pm GMT
12:38
Osborne is turning to the new OBR forecasts.
Since 2010, no economy in the G10 has grown faster than Britain.
That growth has not been fuelled by an irresponsible banking boom, he says.
The north has grown faster than the south. This will be a recovery for all, he says.
The strongest job growth is not just in the capital, but in the Midlands, which is creating jobs three times faster than London and the south east.
12.38pm GMT
12:38
Updated
at 12.41pm GMT
12.37pm GMT
12:37
Osborne says he will extend opportunities for all.
This is a big spending review, by a government that does “big things”, he says.
12.36pm GMT
12:36
Osborne says the £12bn of welfare savings will be delivered in full, “and delivered in a way that helps families as we make the progression to a national living wage”.
12.36pm GMT
12:36
Osborne says he is committed to a surplus.
His plans will deliver that, he says.
And he will bring debt down.
This year debt will fall, and it will keep falling in every year, he says.
Updated
at 12.58pm GMT
12.35pm GMT
12:35
Osborne says five years ago the economy was in crisis. As Labour’s letter said, there was no money left.
Then the job was to rescue Britain. Now it is to rebuild Britain.
12.34pm GMT
12:34
Osborne says the spending review (SR) will put security first.
Economic and national security provide the foundations for everthing the government wants to support, he says.
12.34pm GMT
12:34
We are tracking all the key points from the chancellor’s statement here:
Related: Autumn statement and spending review key points - live
12.31pm GMT
12:31
George Osborne delivers his autumn statement
George Osborne, the chancellor, is just about to start his statement.
It should last for almost an hour.
12.28pm GMT
12:28
This is what Cameron said at the start of PMQs about Chris Martin.
Everyone in this House and many people watching at home know from Yes Prime Minister the central role that Bernard, the Prime Minister’s Principal PPS plays in the life of the Prime Minister and of Number 10 Downing Street.
Well this morning my Bernard, my Principal Private Secretary died of cancer, Chris Martin was only 42. He was one of the most loyal, hardworking, dedicated public servants that I’ve ever come across. I’ve no idea what his politics were but he would go to the ends of the earth and back again for his Prime Minister, for Number 10, and for the team he worked for.
Today we’re leaving the seat in the Officials’ Box where he used to sit empty as a mark of respect to him. We think of his wife Zoe, his family, the wider Number 10 family because it is a bit like a family and we feel we’ve lost someone between a father and a brother to all of us, and whatever happens we will never forget him.
12.26pm GMT
12:26
Cameron says we will be hearing more about the infrastructure plan soon.
In a Guardian article, my colleague Juliette Jowit explains why people should be sceptical about government infrastructure plan announcements. Here’s an extract.
Chancellor George Osborne has promised to put people such as Dave at the heart of his spending review on Wednesday, when he will unveil plans to spend £100bn in this parliament on new infrastructure: roads, railways, power stations and smart meters, flood defences and broadband.
But there should be widespread suspicion of the pledge. Osborne has published national infrastructure plans every year since 2010. These and the latest plan underpin the chancellor’s central themes: that he is investing to create jobs and wealth, giving his party the right to be trusted by voters with the economy.
Analysis of these plans by the Guardian, however, shows these promises are artificially inflated by rising prices, changes to the rules and a host of expensive but still uncertain schemes. In reality, government spending on infrastructure fell in the last parliament.
Updated
at 12.27pm GMT
12.23pm GMT
12:23
Cameron pays tribute to Chris Martin
David Cameron began PMQs with the very sad news that his principal private secretary, Chris Martin, died of cancer today. He was just 42.
In a moving tribute, the PM compared Chris Martin to ‘Bernard” of Yes Prime Minister, saying he was:
One of the most loyal, hard working, dedicated public servants I have ever come across.
He would go to “the ends of the earth and back again” for his team, and he’ll never be forgotten, Cameron added.
Jeremy Corbyn also paid tribute, saying Chris Martin has played a valuable role when Labour was in power too (he served as Press Secretary to both Gordon Brown and Alistair Darling.)
More tributes are coming in:
Really glad PM gave moving tribute to Chris Martin. Lovely man and brilliant civil servant. Will be badly missed
Chris Martin was a model modern mandarin - served us in Labour Treasury with same full commitment as PM said in No10 https://t.co/v06eFI8cqG
Touching tribute by the Prime Minister to his PPS Chris Martin who died of cancer this morning aged 42, condolences to his friends & family.
So sad to hear Chris Martin has died. He was possibly the best official I ever came across in government. He will be much missed
Updated
at 12.27pm GMT
12.20pm GMT
12:20
David Cameron and Jeremy Corbyn both paid tribute earlier to Chris Martin, Cameron’s principle private secretary, who died this morning at the age of 42. The news has prompted Ed Balls, the former shadow chancellor, to post on Twitter.
Chris Martin was a brilliant civil servant. Quality and integrity shone brightly through all he did. Such a loss. https://t.co/57ynzUnYEH
Updated
at 12.27pm GMT
12.16pm GMT
12:16
PMQs - Snap verdict
Andrew Sparrow
PMQs - Snap verdict: A relatively low key exchange, but Corbyn chose two subjects where Cameron was vulnerable and he scored some modest hits (although he could probably have pushed Cameron harder about the Rudd leak). Cameron clearly felt a little frustrated about not being able to say more about the domestic violence announcement coming in the autumn statement, but he and Corbyn both know that what they said will be soon forgotten in the light of the big announcements coming shortly.
Updated
at 12.16pm GMT
12.11pm GMT
12:11
Corbyn says today is the international day for the elimination of violence against women. Why are one third of those referred to English refuges being turned away?
Cameron says the government has put more money into refuges, and that Osborne will say more about that in his statement.
Corbyn quotes a domestic charity worker saying domestic violence victims have a right to the best treatment. The government signed the Istanbul convention making the right to women’s services statutory. When will the government ratify that?
Cameron says the government is going further. He says Osborne will address this in his statement. No government before this one has a stronger record, he says.
12.08pm GMT
12:08
Corbyn says a UN chief scientist has said Britain has gone backwards on renewable energy.
Cameron says he does not accept that. When the cost of renewable energy falls, subsidies should fall too. Otherwise the cost of energy to taxpayers rises. He also says he his building the first nuclear power station for a long time.
Corbyn says 1,000 jobs have gone from solar panel firms. He reads out a question from a solar panel apprentice asking why Cameron is throwing away the progress made in this area.
Cameron says more than 1m homes were fitted with solar panels in the last parliament. But the cost has fallen, so the subsidies should fall too, he says.
12.06pm GMT
12:06
Jeremy Corbyn says 55 Labour councils have made a commitment to run their areas on green energy by 2050. Will Cameron commend them, and urge Conservative councils to do the same.
Cameron says he wants to promote green energy. He will be taking part in the Paris climate talks. But action must be taken locally as well, he says. In the last parliament there was a trebling of the introducing of renewable energy.
Corbyn says Cameron used to say his was the greenest government ever. Does Cameron agree with Amber Rudd that the government will miss its renewable energy target for 2020?
Cameron says his last government was the greenest government ever. It also helped other countries go green.
He ignores the point about Amber Rudd completely.
12.03pm GMT
12:03
Fiona Bruce, a Conservative, asks if the announcements in today’s autumn statement will pass Cameron’s “family test” (ie, that they should support families). Cameron says George Osborne will have something to say about families later.
12.02pm GMT
12:02
PMQs
David Cameron is now taking prime minister’s questions. I will just be focusing on the exchanges with Jeremy Corbyn, and any autumn statement-related material.
11.59am GMT
11:59
Hannah Maundrell, editor in chief of money.co.uk, says we could hear pension tax relief changes for top earners, and a potential increase in fuel duty:
Rumours are rife with news that Osborne will be stopping higher earners from cashing in on pension tax relief before he reforms the way this works next Spring. Hopefully he’ll step up to the plate and sort out the pension exit fees that are punishing over 55’s that take advantage of his new pension freedoms rise too. While he’s likely to back peddle on his tax credit reforms, he could end up hitting the same households if he targets housing benefit instead.
A trip to the pump this morning could be worth your while as a fuel duty hike seems inevitable. Petrol and diesel prices are the lowest we’ve seen for a long time so drivers should expect a second shock after already swallowing the £13 av. increase in insurance premium tax.
11.55am GMT
11:55
Evgeny Lebedev, who owns the Evening Standard, looks as if he has just tweeted an autumn statement announcement.
Fantastic news! The Treasury to double every pound raised by our #GivetoGOSH campaign https://t.co/2saxaqZ57H
11.50am GMT
11:50
And George Osborne has been tweeting ahead of his statement too.
Today's Spending Review will deliver economic and national security - the foundations for everything we do #SR15 pic.twitter.com/Fgstmgfm48
11.48am GMT
11:48
Jeremy Corbyn, the Labour leader, has tweeted about the autumn statement.
Important day - #PMQs at 12pm & #CSR15 after. We hope Tories have listened & u-turn on drastic cuts to police, tax credits & public services
11.42am GMT
11:42
Torsten Bell, a former Treasury civil servant and Labour adviser who now runs the Resolution Foundation, has this take on the importance of autumn statements.
Lasting impact of Budgets often over-done in immediate analysis. Opposite true of spending reviews, which set direction for the parliament
11.38am GMT
11:38
The Royal Institution of Chartered Surveyors is surprisingly sceptical about the plans that George Osborne is due to announce for 400,000 new homes. This is from Jeremy Blackburn, the RICS head of policy.
A push towards affordable home ownership should not come at the expense of affordable homes for rent. If cities such as London are to thrive, we need to ensure that housing can be provided for all of its workforce - home ownership can only go so far and even shared ownership may prove too expensive for some. We would like to see the chancellor incentivise affordable homes for rent in both public and private sectors.
George Osborne is essentially subsidising one sector of the housing market over all others, in an area that already benefits from significant Government funding. Although the announcement is on the face of it encouraging for certain sectors, the devil will be in the detail.
11.37am GMT
11:37
Anyone got any spare metallic paint?
Downing Street Car Crash! Well ... a small prang between Prime Ministerial vehicles ahead of #PMQs pic.twitter.com/gQvhiEY4Y9
Has PM had a car crash? No10 reveals Cameron car "momentarily touched another car" but "no damage was done to either vehicle"
11.27am GMT
11:27
George Osborne has just left the Treasury (no, not permanently), and hopped into his limo for the short journey to parliament:
Fingers crossed that we avoid a second prang.
Updated
at 11.27am GMT
11.13am GMT
11:13
Lord Porter, the Conservative chair of the Local Government Association, has told the Guardian in an interview that some councils could effectively go bust if the cuts in the spending review are as deep as expected.
11.09am GMT
11:09
Britain’s barristers are worried that the justice system could be imperilled if the chancellor swings the axe in its direction today.
Chairman of the Bar Council, Alistair MacDonald QC says:
“It is because citizens have access to justice that big businesses pay their small firm suppliers in good time, that parents can get the right pay and leave from their employers, and that elderly people get the care to which they are entitled.
“The idea that people who need to use the courts are being subsidised by the tax-payer is completely wrong. When people use the courts and other legal avenues to enforce the law, it helps to ensure that we all play by the rules. Without access to justice, everyone will suffer because the rules will cease to matter.”
Updated
at 11.10am GMT
11.08am GMT
11:08
Martin Kettle
Our colleague Martin Kettle has written a piece this morning saying we would be better off just abolishing autumn statements and spending reviews. Here’s an extract.
There is a very strong case for saying that both rituals are largely unnecessary and that, in particular, they allow the Treasury and the chancellor to get far too tough a grip on the government’s strategy and approach. While accepting that today’s speech and announcements are indisputably important as framing exercises, it is also important to stress that they don’t need to be treated as respectfully as they are. In short, we might be better off without either of them.
But surely we have to have them? No we don’t. Unlike the annual budget, the autumn statement and the spending review are recent inventions: the autumn statement dates from 1976; the spending review only from 1998. Neither of them is an ordained or ancient part of the way UK government works. The autumn statement is a purely political confection. It has no economic purpose. It exists primarily to allow the chancellor to command a second big parliamentary event of the year (indeed this is the third of 2015, in which Osborne has already delivered two budgets, one of them only four months ago).
In essence the same applies to the spending review, which was invented by Gordon Brown ostensibly to give the appearance of having a sensible long-term economic strategy. It succeeded in that political aim, though the strategy didn’t turn out as cleverly as Brown claimed and most observers accepted at the time. In reality, the spending review was conjured up to enable Brown to bind all his rival departmental ministers into decisions from which they could not escape. The spending review is about the assertion of political power — the chancellor’s power — not economic strategy.
11.03am GMT
11:03
Here is Patrick Wintour’s full story on how the government is planning to breach its welfare cap.
10.55am GMT
10:55
There was a slight prang in Downing Street earlier. Bad omen?
Augur for today? slight prang between two cars of the prime ministerial motorcade in Downing St a few moments ago
10.53am GMT
10:53
If George Osborne does breach the welfare cap it will be all the more remarkable because even Jeremy Corbyn said he accepted it; he said so in an interview to the New Statesman in September.
10.49am GMT
10:49
Here are some pictures of ministers arriving and leaving Number 10 for today’s autumn statement cabinet meeting.
Theresa May, the home secretary, is braced for cuts - and did not look overly cheerful.
Health is getting more money, which may be why Jeremy Hunt looked more upbeat.
The Department for Business is expecting cuts. Here’s Sajid Javid, the business secretary, and Priti Patel, the employment minister.
God knows what’s happening to the small business budget, but Anna Soubry, the small business minister, looks like she’s had a shock.
Unlike David Cameron who looks, well, as smug as ever ...
10.45am GMT
10:45
Andrew Harrop, general secretary of the Fabians, has blogged about how breaching the welfare cap would ‘liberate’ the chancellor:
it was Osborne’s pre-election promise of £12 billion of cuts to welfare that really did the damage and led inexorably to the tax credit reforms. First Osborne made the welfare pledge, then he protected pensioners and the severely disabled, and finally he realised that a Tory-only Treasury could not impose cash cuts on the very worst off who are not in work. There was no choice left but to hit the working poor.
It is sometimes said that George Osborne never expected to implement the £12bn promise. It was designed only as a negotiating position in advance of post-election coalition talks. Whatever the truth in that, now the chancellor must let it go and cancel the cuts planned for existing tax credit claimants. And that also means increasing the value of the ‘welfare cap’, Osborne’s self-imposed straightjacket which he tightened at the last Budget and he can now loosen again.
Ditching the welfare pledge would be liberating, because if Osborne scraps that one promise he will suddenly have lots of options before him.
More here:
The welfare pledge: Osborne is a prisoner of his own imagination
Updated
at 10.46am GMT
10.38am GMT
10:38
Does every u-turn have a silver lining? Nick Clegg’s former special advisor, Polly Mackenzie, reckons it might:
Welfare cap only a political trick so breaching it works just as well as not. Vote on breach moves Osborne to the centre ground = victory.
.
10.35am GMT
10:35
Rupert Harrison used to be George Osborne’s chief of staff. He is working in the City now, and using Twitter to advise people not to be taken in by Treasury “expectation management” ahead of the autumn statement.
Challenge on the morning of an SR or Budget is telling what is real and what is expectation management by HMT. Usually the latter...
10.22am GMT
10:22
Jonathan Portes also hopes that the welfare cap might be dropped altogether:
Welfare cap, like surplus target, never had any economic rationale. Would be best to abandon it permanently. https://t.co/iVG4djlQhQ
"meaningless gesture" - here's how I described "welfare cap" when it was announced. Glad George Osborne now agrees. https://t.co/W3vntX4Obp
10.15am GMT
10:15
The Welfare Cap shows the dangers of ‘soundbite’ driven fiscal policy, argues economist Jonathan Portes, of the National Institute of Economic and Social Research:
Govt may breach own self-imposed, entirely unnecessary "welfare cap". Illustrates absurdity of soundbite budgeting https://t.co/eZ4Wwnk1tc
Updated
at 10.17am GMT
10.11am GMT
10:11
Welfare cap analysis - How Osborne said breaching it would be 'a failure of public expenditure control'
Andrew Sparrow
One of the criticisms of George Osborne as chancellor is that he can be too clever by half, that some of his political schemes are so devious that they can backfire. For anyone advancing this theory, the welfare cap now looks like an ideal example.
Osborne announced a welfare cap, a cap on the overall amount the government can spend on certain welfare payments, in the budget of 2014. It is not the same as the benefits cap, the cap on the amount of benefits that an out-of-work family can receive (originally £26,000, but now being cut to £20,000 for families outside London.) The benefits cap proved remarkably popular with voters, and so Osborne decided to apply the same principle to overall welfare spending. At the time it was perceived primarily as a trap for Labour; Osborne was hoping that the opposition would vote against, thus allowing him to depict them as profligate with welfare spending. In the event this ploy failed, because Ed Miliband and Ed Balls decided their party should vote in favour of the welfare cap, and the issue quickly dropped out of the political headlines.
As a restraint on government the welfare cap was always relatively ineffective because, under Osborne’s proposal, any government could break i and spend more if it wanted to. But it would have to go to the Commons to win approval in a vote. Osborne argued that this would prove embarrassing, and that the unappetising prospect of having to ask MPs to vote for extra welfare spending would act as a deterrent.
In the debate on the welfare cap in March 2014 he said that breaching the welfare cap would be “a failure of public expenditure control”. Any chancellor taking this step would have to admit that what they really want is “higher welfare bills”, he said.
The charter makes clear what will happen if the welfare cap is breached. The chancellor must come to parliament, account for the failure of public expenditure control, and set out the action that will be taken to address the breach ...
The welfare cap brings responsibility, accountability and fairness. Those who want to undo our welfare reforms will now have to tell us about the other cuts that they will make, or else come clean and admit to the public that what they really want are higher welfare bills ..
From now on, any government who want to spend more on welfare will have to be honest with the public—honest about the costs—and secure the approval of parliament in order to breach the cap.
Expect those words to be flung back at Osborne this afternoon. Now it seems that he is going to have to go to parliament himself and admit that he’s the one asking for “higher welfare bills” because he’s failed to meet his own spending targets.
Updated
at 10.15am GMT
10.04am GMT
10:04
The news that George Osborne is planning to breach his own welfare cap is causing a stir on Twitter:
Breaching own #welfare cap is incredibly embarrassing for @George_Osborne. Surely cutting more would be a better option? #spendingreview
If Chancellor is going to breach his own welfare cap, he'll need to pull a very big rabbit out of the hat to stop that being main story.
@patrickwintour Tarnishes the whole exercise. Many Tory MPs will have difficulty explaining the whole point of the welfare cap to public
Financial Times political correspondent John McDermott says Osborne still has a little ‘wiggle room’, though:
Not sure why I put +/- there ... it's a cap so only applies to 2 per cent above that level. Means Osborne has about £2bn in wiggle room.
Updated
at 10.07am GMT
9.43am GMT
09:43
Tom Blenkinsop, Labour MPs for Middlesbrough South and East Cleveland, predicts two u-turns from the chancellor, on the welfare cap and on the 2020 budget surplus.
Today #0sborne will announce that he'll break his own welfare cap, and slash his assumed budget surplus, all only 6 months after #GE2015
9.34am GMT
09:34
Osborne planning to breach his own welfare cap
Patrick Wintour
George Osborne has set in train plans to breach the Treasury’s welfare cap after deciding it cannot find enough welfare savings to compensate for the decision to slow the pace of cuts to tax credits.
The chancellor has held discussions with the Department of Work and Pensions to arrange a Commons vote that would give the government permission to breach the cap.
The vote will be passed by MPs but the decision is likely to be seen as a political embarrassment for Osborne since he largely invented the self imposed cap in the last parliament as a trap to show Labour is lax on welfare spending. In the end the shadow chancellor Ed Balls embraced the cap.
The request to the DWP suggests that cuts to housing benefit likely to be found in Wednesday’s Autumn Statement will fall short of the £4.4 bn that would have been saved by changing the threshold of tax credit payments.
Osborne has many options to mitigate the impact of the tax credits and some would not require him to bust his plan to have the budget in overall annual surplus by the end of the parliament, probably the single biggest target he has set himself.
Osborne, speaking on BBC1’s Andrew Marr programme on Sunday referred to the need to go back to parliament if we was to breach the welfare cap, but he was not pressed on whether he intended to do so.
Updated
at 9.37am GMT
9.33am GMT
09:33
Overnight it emerged that housing will be a big focus in the autumn statement. As the Guardian splash reveals, George Osborne will commit himself to “the biggest affordable housebuilding programme since the 1970s – with over 400,000 new homes built across England”.
Labour has dismissed this as hot air. This is from John Healey, the shadow housing minister.
If hot air built homes, then Conservative ministers would have our housing crisis sorted. A matter of weeks ago the housing minister promised a million more homes, now George Osborne is saying they’ll build 400,000 more.
George Osborne’s first act as chancellor in 2010 was to slash housing investment by 60%, and his plans today could still mean 40% less to build the homes we need compared to the investment programme he inherited from Labour.
The Tories’ housing record speaks for itself. The lowest peacetime level of housebuilding since David Lloyd George was prime minister in the 1920s, home ownership fallen year-on-year to the lowest level in a generation, and alongside the lowest number of genuinely affordable homes built in two decades, the number of affordable homes to buy halved since 2010.
9.31am GMT
09:31
CEBR: £30bn black hole looming
The Centre for Economics and Business Research believes George Osborne could be facing a £30bn ‘black hole’ in his budget forecasts.
Like many economists, the CEBR believes this year’s deficit will be higher than the £69.5bn forecast. But it also reckons that economic growth will be weaker than expected - leaving the UK with a deficit of almost £20bn in 2020, not the £10bn surplus currently pencilled in.
The Cebr explains:
“Because the Chancellor’s forecasts rely on an implausibly high rate of growth we think that the Government’s fiscal position is much less favourable than was set out in the July Budget.
“The deficit will not be eliminated in the current Parliament.”
That chimes with the IFS’s warning early this morning, although it doesn’t expect major revisions to growth forecasts today.
Updated
at 9.57am GMT
9.18am GMT
09:18
Shares in Britain’s house builders are rallying this morning, on the back of reports that the chancellor will pledge an extra £7bn of fresh investment in housing.
Trader have pushed Persimmon, Taylor Wimpey and Barratt to the top of the FTSE 100 leaderboard:
Osborne is expected to promise 400,000 new homes, to “turn generation rent into generation buy”.
Updated
at 9.20am GMT
9.03am GMT
09:03
The trick to successful trap-laying is to make damn sure that you lure your quarry, rather than falling into it.
But Sky’s Faisal Islam believes that George Osborne may have snared himself with his decision to cap Britain’s welfare bill. He’s doesn’t appear to have left himself any margin to change course on tax credits, without pushing up the bill.
Faisal explains:
The problem arises because Mr Osborne, in addition to making sharp welfare cuts, chose to push down the welfare cap to the levels of welfare spending forecast in July by the Office for Budget Responsibility - £115bn in the 2016/17 financial year.
This means there is no wriggle room for a significantly more generous phasing of tax credits in the coming year without busting the cap.
The OBR assesses compliance with the welfare cap under the Charter for Budget Responsibility at every Autumn Statement.
The policy was designed as a trap for Labour, but the Chancellor would appear to have been caught in it himself.
“It’ll be breached ... he’s not going to get it for next year,” said one Westminster source.
£115bn Welfare Cap breach expected, as Commons vote prepared: my story - https://t.co/LYR9v43cB3
Updated
at 9.08am GMT
8.54am GMT
08:54
Under Osborne’s original plans to cut tax credits by £4.4bn, the Resolution Foundation said that 3.3m families would lose on average £1,300 a year.
According to the BBC’s Laura Kuenssberg, under the revised plans families earning around £20,000 a year could now lose “only” around £300 a year.
Tory tax credit rebels expect big pulling back from cuts, MAYBE down to £8 a wk loss but details not at all clear or confirmed tonight
The inverted commas around that “only” are important; the problem for Osborne is that the sums involved in the original cuts were so enormous that, even if he takes substantial steps to lessen their impact, they will probably still hammer the blue-collar, inwork “strivers” that the Tories claim to represent.
8.54am GMT
08:54
You can also get up to speed on today’s events with our Q&A on the spending review, explaining which departments could be hit hardest:
Related: What is George Osborne's spending review?
8.51am GMT
08:51
Katie Allen has pulled together the most important charts to explain today’s autumn statement:
Related: Autumn statement 2015: five key charts
It shows how Britain has rarely achieved a budget surplus. The last one was back in 2001:
8.43am GMT
08:43
IFS says hitting Osborne's budget surplus target will be 'close to impossible' to achieve if economy underperforms
The most influential commentator on the autumn statement, by a mile, is the director of the tax and spending thinktank, the Institute for Fiscal Studies. As all chancellors have discovered in recent years, if you can persuade the IFS that your numbers stack up, in the court of informed opinion you’ve won, regardless of what the opposition or anyone else has to say. But if the IFS is critical, you’re in trouble.
The current head of the IFS is Paul Johnson and he was on the Today programme this morning. He made two key points.
[Osborne] set himself a really tough target to get to this surplus in 2019, and the problem with this target is it’s very much unlike the targets he set himself in the last parliament; it is fixed and inflexible. So if it turns out that the economy does even a little worse than he’s expecting over the next few years, I think it will be close to impossible to meet unless he’s going to put some tax increases in place.
If the economy pans out as he currently expects, and tax revenues come in as he expects, it might be just about reachable but only at the cost of really big cuts in things like the Home Office, local government and other departments.
There is a reasonable case to be made for getting into surplus at some point because that increases the rate at which we pay down the debt we have, which is currently around 80% of national income which is quite a high level. But whether he meets that target in 2019 or 2020 or 2021 doesn’t matter terribly much from an economic point of view.
From an economic point of view, even if you want to get into surplus and stay there, the speed in which you do it doesn’t matter that much, as much as getting there within some period.
8.36am GMT
08:36
Autumn statement: Borrowing target in doubt
Graeme Wearden
The latest borrowing forecasts are unlikely to bring much cheer.
The Office for Budget Responsibility is expected to revise UP its forecast for the deficit this financial year, from £69.5bn to perhaps £74bn. That’s because last month’s public finance figures were alarmingly poor, with Britain borrowing more than at any time since 2009 to cover weak tax revenues.
So while this year’s deficit (the black line above) will still be lower than last year (the blue line), it might be several billion pounds higher than we were promised in the budget.
That’s a blow to a chancellor who has welded his reputation to the cause of deficit reduction. It also gives George Osborne less wriggle room to soften austerity, if he remains committed to balancing the books his parliament.
And crucially, the OBR (Britain’s fiscal watchdog) might conclude that borrowing will be higher in future years too. That would put Osborne’s goal of a £10bn surplus in 2019-20 in doubt.
Although tax credits could dominate the headlines, economists are looking for some other measures to stimulate growth.
We already know that the chancellor is planning to boost housebuilding, to address Britain’s affordable housing crisis.
Businesses will be crossing their fingers that the government shakes up business rates; many are paying rates based on property values before the 2008 crash.
Infrastructure spending - a perennial favourite. The chancellor will surely bang the drum for the Northern Powerhouse, while Labour’s John McDonnell will rebut that the UK is still spending less than the 3.5% of GDP which the OECD recommends
Drivers have benefitted from a freeze on fuel duty. But prices at the pump are lower, now oil is trading below $50 per barrel, so Osborne might decide that the nation’s wallets and purses can handle a higher fuel levy.
Updated
at 9.52am GMT
8.26am GMT
08:26
Spending review - Political challenge
Andrew Sparrow
Today’s autumn statement from George Osborne was supposed to be the big political event of last quarter of the year. In the event, because of the Paris attacks, it does not quite feel like that, but nonetheless this is one of the landmark political moments of the year - and of the parliament too. This is what we’re getting.
1) An autumn statement - a mini budget in itself.
2) A spending review, covering government spending until 2019-20. Osborne wants to eliminate the deficit by the end of the decade and so his spending review is going to involve very, very deep cuts to departments that are not protected. It will change the shape of the state, and alter long-term what it does.
3) A solution to the tax credits crisis. The House of Lords rejected Osborne’s plan to save £4.4bn by cutting tax credits, and today Osborne will offer an alternative approach. In some respects this will amount to a U-turn. But will the new welfare-saving measures he proposes as an alternative prove just as unpopular? Gordon Brown faced a similar problem when his abolition of the 10p starting rate of tax backfired, and that episode damaged his reputation almost beyond repair.
4) A settlement for the police. The Home Office is an unprotected department, and the police have been braced for significant cuts. But, since Paris, this has become much more problematic and even Tory MPs have been lobbying Osborne to protect police forces. Today we will find out to what extend he has been listening.
I’m Andrew Sparrow and I will be covering the statement with my colleague Graeme Wearden, bringing you all the best reaction and analysis. We will particularly be focusing on “small print alerts” - the detail in the statement that Osborne might prefer you did not notice.
The key timings are:
12pm: PMQs. (We will cover David Cameron’s exchanges with Jeremy Corbyn, and anything autumn statement-related.
12.30pm: Osborne delivers the autumn statement.
If you want to follow us on Twitter, I’m on @AndrewSparrow and Graeme is on @graemewearden.
