The Chamberlain News

Osborne abandons tax credit cuts and finds cash for the arts in ‘sugary pill’ Autumn Statement

George Osborne performed a rare and very public U-turn in his Autumn Statement and Spending Review today, scrapping controversial plans to save £4.4 billion by cutting tax credits, and bowing to public pressure by cancelling any further cuts to police budgets.

The Chancellor said: “Now is not the time to cut police spending. Now is the time to back our police and give them the tools do the job”. He promised to increase police budgets in line with inflation.

Mr Osborne said he could abandon his tax credits cuts plan because of “an improvement in public finances.”

He said he would still be able to deliver the promised £12 billion in welfare cuts over the next five years while balancing the books by the end of the Parliament.

As expected, he doubled the housing budget to £2 billion and announced plans to build 400,000 more affordable homes, half of which will be starter homes.

The Chancellor confirmed the basic state pension is to rise by £3.35 next year to £119.30 a week.

And in other eye catching announcements he said councils would be able to levy an additional two per cent on the council tax to help pay for social care, while also committing to a £10 billion real terms increase in NHS spending.

Mr Osborne said the Government would keep free museum entry and is looking at a new tax credit to support their exhibitions. Arts Council funding will increase and UK Sport’s budget will rise by 29 per cent. Contrary to rumours, Mr Osborne had no plans to ‘raid’ the Big Lottery Fund.

The Chancellor’s announcement of new money for the arts was welcomed by Andy Howell, Strategic Director of Birmingham Arts Partnership (BAP):

“As George Osborne said, the arts, culture and heritage are one of our “best investments” – which is as true across the West Midlands as for the whole of Britain.

“We will wait to see the finer details of the spending announcements, but we believe increasing the cash which Arts Council England (ACE) makes available directly to the arts, reducing overheads, is a move in the right direction. Birmingham’s cultural organisations – large and small – will be making strong cases to ACE to further invest in the city and region as part of its commitment to re-balancing arts spending outside of London.”

Referring to Birmingham city council’s new leader John Clancy, Mr Howell said:

“The Autumn Statement is going to be challenging to local government – and in particular Birmingham City Council. We will be working closely with the Council’s new leader-elect to maintain arts spending whilst creating new models of cultural leadership.

“Councillor Clancy is an enthusiastic proponent of new financial models and we look forward to talking to him about more innovative use of Council assets to support culture as well as bringing forward proposals for further tax credits and income generation.”

While coating his pill with some sugary spending increases, Mr Osborne’s overall message for Whitehall departments continued to be one of budget cuts.

HM Revenue and Customs is to have to make savings of 18 per cent in its own budget, while the Department for Transport will see its funding cut by 37 per cent.

The Departments of Energy and Climate Change and Business, Innovation and Skills will be cut by 22 per cent, and Environment by 15 per cent.

However, Mr Osborne said there would be a 50 per cent increase in spending on transport schemes to £61 billion and £2 billion for flood protection.

There will also be a new three per cent surcharge on stamp duty for buy-to-let properties and second homes from April 2016, raising almost £1 billion.

The Chancellor said there would be free 30 hours of childcare for three and four year olds from 2017, but only to parents working more than 16 hours and with incomes of less than £100,000.

A levy on companies to fund apprenticeships is being set at 0.5 per cent of an employer’s pay bill, the Chancellor announced.

Main points from the Autumn Statement:

Devolution, Communities and Local Government

The housing budget will be doubled to £2 billion. Measures to increase house building and home ownership include:

– 400,000 more affordable homes, half of which will be starter homes.
– From midnight tonight, Right to Buy will be available for tenants of five housing associations.
– Public land will be made available for 160,000 homes and re-designating unused commercial land for Starter Homes.
– New rates of Stamp Duty that will be three per cent higher on the purchase of additional properties like buy-to-lets and second homes.
– Housing benefit for new tenancies in the social rented sector will be set at the rate of the local housing allowance.There will also be restrictions claims for housing benefit and pension credit payments on those who have left the country for more than a month.
– The Temporary Accommodation Management Fee will be removed from the benefits system, with local authorities taking on more responsibility in supporting homeless people – with the proposal for some of the administration of housing benefit to be devolved.

– £12 billion for the Local Growth Fund as already promised.
– Creation of 26 new or extended Enterprise Zones, including 15 zones in towns and rural areas

Employment and Skills

Mr Osborne confirmed that the £12 billion of welfare savings committed to at the election by the Conservatives would be delivered in full.

14 per cent in savings will be made to the resource budget of the Department for Work and Pensions, and the Cabinet Office budget will be cut by 26 per cent.

Headline announcements included:

– £4.4 billion tax credit cuts will be scrapped altogether. There will also be no further changes to the universal credit taper, or to the work allowances beyond those that passed through Parliament next week.
– The minimum income floor in Universal Credit will rise with the National Living Wage.

– Housing benefit and pension credits will no longer be paid to anyone who has left the country for more than one month.
– A new apprenticeship levy will be introduced from April 2017. The apprentice levy rate will be set at 0.5 per cent of an employer’s pay bill – every employer will receive a £15,000 allowance to offset against the levy.
– Next year the basic State Pension will rise by £3.35 to £119.30 a week.

Business and Taxation

The BIS budget will be reduced by 17 per cent. 18 per cent efficiencies were announced for HM Revenue and Customs.

Key announcements in this area include:

– An extra £800 million in the fight against tax evasion
– Every individual and every small business will have their own digital tax account by the end of the decade, in order to manage their tax online.
– Abolition of the uniform business rate with local councils allowed to keep all revenue raised by 2020.
– Extension of the small business rate relief scheme for another year.
– £165 million of new loans to companies instead of grants.
– Capital gains tax to be paid within 30 days of completion of any disposal of residential property.
– Income tax to reach 36.5 per cent by 2020.
– Corporation tax in NI to be set at 12.5 per cent.
– Devolution of income tax to Wales can take place without a referendum.
– Commitment to the same level of support for aerospace and automotive industries for the next decade.
– Spending on new catapult centres will increase.
– Until EU rules change to abolish it entirely, the £15 million a year raised from the ‘Tampon Tax’ will be used to fund women’s health and support charities.

Health

– The NHS will receive an additional £10 billion a year above inflation by 2020, with £6 billion frontloaded in the first year, next year.

– Over £500 million will be invested in new hospitals including in Cambridge, Brighton, and Sandwell.

Extra support for mental health services was announced in the statement. £600 million in additional funding will be spent on talking therapies, perinatal mental health services, and crisis care.

Local authorities responsible for social care will be able to levy a new social care precept of up to two per cent on council tax. This will be spent exclusively on adult social care, bringing approximately £2 billion more in to the care system.

The Better Care Fund is also being increased. Local authorities will have access to an extra £1.5 billion by 2019-20.

Home Affairs and Justice

Mr Osborne announced that there would be no cut to police budgets at all. He committed to real terms protection for police funding.

He also announced a £700 million investment in new technology in the justice system, from savings made from court efficiencies.

International Affairs and Defence

As well as improving existing infrastructure, the new £1.9 billion investment in cyber security will fund the establishment of a National Cyber Centre, as well as a £165 million Defence and Cyber Innovation Fund, two new cyber innovation centres and an incentive to open a new Institute of Coding.

The Strategic Defence and Security Review published earlier in the week commits Britain to spending two per cent of our income on defence.

The Chancellor announced today that the FCO budget will be protected in real terms.

Infrastructure

The Department for Transport’s operational budget will fall by 37 per cent. However, transport capital spending will increase by 50 per cent to a total of £61 billion.

Headline announcements across infrastructure included:

– London will get an £11 billion investment in its transport infrastructure.
– Spending on energy research will be doubled with a major commitment to small modular nuclear reactors.
– Support for climate finance will be increased by 50 per cent over the next five years.
– Energy Intensive Industries, like steel and chemical industries, will be permanently exempt from the cost of environmental tariffs.
– £300 million will be invested in delivering Ebbsfleet, the first garden city in nearly a century.
– £5 billion on roads maintenance this Parliament.

Education, Science, Culture, Media and Sport

In Education the key announcements were

– Schools budget protected in real terms.
– Total financial support for education, including childcare and our extended further and higher education loans, will increase by £10 billion.
– An increase to the funding of nurseries by £300 million.
– Sixth form colleges will be allowed to become academies so they don’t have to pay VAT.
– Continued funding for free infant school meals, protection for rates for the pupil premium, and an increase the cash in the dedicated schools grant.

500 new Free Schools and University Technical Colleges.
– Investing £23 billion in school buildings and 600,000 new school places.
– Expansion of the National Citizen Service.
– Student finance – Part-time students will be able to receive maintenance loans, tuition fee loans for those studying higher skills in FE. Loans will also be extended to all postgraduates.

The science budget was protected so it in real terms so it rises to £4.7 billion.

The DCMS core administration budget will fall by 20 per cent.

Mr Osborne committed to:

– Keeping free museum entry and to looking at a new tax credit to support their exhibitions.

– An increase in funding to the Arts Council and 29 per cent increase to UK Sport’s budget.

– No ‘raid’ to the Big Lottery Fund