Chancellor abandons tax credit and police budget cuts

IFS figures showed that by 2020, 2.6 million working families would lose on average 1,600 pounds ($2,420) in benefits a year and 1.2 million non-working households would lose 2,500 pounds. “The risk for him is that if that turns just a little bit again, as it may well do, then he will either have to do some more in terms of tax increases or come back to those departments and cut them further”, Paul Johnson, director of the Institute for Fiscal Studies, a non-partisan think tank, said.

Shadow work and pensions secretary Owen Smith said: “I welcome the fact that the Chancellor has bowed to Labour pressure and reversed the immediate unfair cut to tax credits”.

Mr Osborne’s perceived Spending Review largesse was made possible by a £27bn windfall from a combination of better-than-forecast tax receipts and lower-than-expected debt interest rates.

George Osborne’s spending review was a political masterclass, neutralising the biggest threats to the Government’s and his own reputation – tax credits and police budgets – and seemingly keeping a steady hand on the economic tiller.

Mr Osborne also vowed he would “deliver in full” the unprecedented £12 billion welfare spending cuts included in the Budget.

Mr Johnson said that Mr Osborne would “need his luck to hold out” given the chancellor’s self-imposed target of achieving a surplus in 2019-20. If Osborne is unlucky next time he will “have to revisit these spending decisions, raise taxes, or abandon his target”.

“This Spending Review is still one of the tightest in post-war history”, he said. “The police protect us, and we’re going to protect the police”.

The changes to the tax credit system would mean that £4.4 billion would be saved, but those against the plans said that people would struggle elsewhere and the savings would not end up happening.

In addition the authority fears the apprenticeship levy on employers could cost it up to £1m while plans to withdraw the education services grant, which covers local authority support for schools, represents a further reduction of up to £7m.

Chancellor George Osborne had pledged to reduce police funding and tighten tax credits offered to the country’s lowest paid workers to reach his ambition of an overall budget surplus by 2020. “This was a spending review that reflected his zeal, not Britain’s ideals, which will hurt businesses and people struggling to make ends meet”.

Mr McDonnell said: “We know where they’ll fall – on the most vulnerable, the poorest and those just struggling to survive”. These measures were expected to account for around 235 million pounds annually by 2020/21.

“The changes to local government financing and devolution are genuinely radical and could transform both the role of local government and the UK’s fiscal architecture”.

“As the Chancellor set out, for current tax credit claimants, because of the Government’s economic plan, we can now help with the transition to Universal Credit by avoiding changes to tax credits altogether”.