George Osborne: Tax credits U-turn not a sign of weakness

The director of the independent economic thinktank the Institute of Fiscal Studies warned there was only a “50-50” chance of the revenue forecasts remaining so positive.

The Office for Budget Responsibility maintained its forecast for a 10 billion-pound budget surplus in the 2019-20 fiscal year.

Cuts to Britain’s welfare and police budgets will not go ahead following widespread criticism of the United Kingdom government’s plans.

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.

Mr Johnson said the Chancellor had been “quite lucky” but added “the public finance forecasts were not desperately rosy relative to where they were in July” at the time of the Budget and the revisions were “easily within the margins of error”. He also pointed out that the government’s commitment to health spending was tiny by historical standards. “A swathe of [government] departments will see real terms cuts”.

Concluding his speech Mr Osborne said: “Five years ago, when I presented my first Spending Review, the country was on the brink of bankruptcy and our economy was in crisis”.

The shadow chancellor said the IFS announcement showed “the Tory spin is unravelling”. The original estimate was “just wrong”, Johnson said. “The gap with what one might have expected, based on the Conservative manifesto, is substantially greater”.

Despite Chancellor George Osborne’s decision in Wednesday’s Autumn Statement to scrap cuts to tax credits proposed for next April, the IFS said that his plans still envisage reducing non-pension benefits to their lowest level as a share of national income for 30 years.

McDonnell said: “We said this was a smoke and mirror spending review and we were right”.

The Chancellor confirmed plans to double the housing budget with spending partly funded by 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. “In the long run, the system will be significantly less generous to low-income families, both in and out of work”.

Tax credits are due to be replaced by Universal Credit and Mr Osborne had already taken the axe to those benefits in his July Budget.

However this leaves 1.9 million working families better off, getting an extra £1,400 a year, and 0.6 million non-working families, who will benefit from an extra £1,000 a year.

A source close to Duncan Smith said the Resolution Foundation report was misleading and an example of scaremongering, as people will not see immediate cash losses to their welfare payments.

And the Chancellor said himself that the U-turn on tax credits will only provide a temporary reprieve until 2018 for Britain’s poorest workers.