Today the Chancellor of the Exchequer, the Rt Hon George Osborne MP, delivered his Autumn Statement and Comprehensive Spending Review to the House of Commons. Emphasising economic security, the Chancellor vowed to re-build Britain. A promise to scrap tax credit cuts came as the biggest surprise, but he also made major announcements on housing, infrastructure and devolution. The Chancellor announced that the National Debt was due to fall from 82.5 per cent of GDP in 2015 to 71.3 per cent by 2020, allowing the government to reach a spending surplus of £10 billion.
Expenditure and taxation
The biggest shock of the Autumn Statement came when the Chancellor announced that he will abandon controversial plans to cut tax credits. The Chancellor claimed that improvements to public finances allow him to avoid the changes while still making £12 billion of welfare savings. Tax credits, he reminded the House of Commons, are due to be phased out anyway as Universal Credit is phased in.
Many Whitehall departments face deep budget cuts, including 18 per cent at HM Revenue & Customs, 25 per cent at the Department of Health and even 24 per cent at the Treasury itself. However, there is some protected expenditure, including for the police, the NHS, schools, defence and aid.
Housing and infrastructure
Housing featured prominently in this afternoon’s announcements. The Chancellor pledged to deliver 400,000 affordable homes by 2020-2021, push ahead with the extension of Right to Buy to Housing Association tenants, reform the planning system, invest in estate regeneration and SME housebuilders, and support the development of a garden city at Ebbsfleet.
Plans were also announced to extend Help to Buy, as well as introduce a new London Help to Buy scheme, offering buyers with a five per cent deposit an interest-free loan of up to 40 per cent of the value of a new-build home. The Chancellor also introduced a three per cent Stamp Duty increase on purchases of buy-to-let properties and second homes. Meanwhile, new social housing tenants will see their housing benefit capped at similar levels to private sector renters.
The Chancellor also revealed that the Government’s planned investments in infrastructure have increased by £12 billion. Transport investment is set to increase by 50 per cent, despite cuts of 37 per cent to the Department for Transport. Nine new prisons will also be built, with plans to sell off old Victorian sites for redevelopment.
The Chancellor committed to doubling expenditure on energy innovation, investing £250 million in a programme of nuclear research and development and increasing funding to tackle climate change. Plans were also announced to extend programmes to reduce electricity bills for low-income homes, as well as introduce new energy supplier obligations in 2017. However, at the same time, the Chancellor also announced cuts of 40 per cent to a scheme backing green heating systems. Up to ten per cent of tax revenue from shale gas extraction could also be reinvested in communities hosting shale gas developments through a ‘Shale Wealth Fund’.
Local development and devolution
Local development featured heavily, with the Chancellor promising to invest in northern businesses and transport. He also pledged that, by 2020, councils will be able to keep 100 per cent of the business rates that they collect to spend on local services. At present, local councils retain 50 per cent of any new business rates generated. Local authorities will also be able to cut rates, and directly-elected mayors will be able to raise them in order to invest in infrastructure (with the permission of local businesses). These reforms are part of a package of measures which will enable the Government to phase out the local government grant.
Corporation tax is set to be cut from 20 per cent to 18 per cent, while the Small Business Rate Relief scheme will be extended for a further 12 months after April 2016. The Chancellor also announced new funding for apprenticeships, delivered through a 0.5 per cent levy on large employers’ paybills. This is expected to be worth £3 billion by 2020, and will fund three million apprenticeships.