Osborne U-Turn On Tax Credits And Police Cuts

George Osborne has announced he will ditch controversial cuts to police budgets and tax credits.

The Chancellor revealed the major U-turns as he outlined spending plans for the Government over the next five years.

There was a deafening roar from the Tory benches as he announced police forces would escape Whitehall cuts and that funding would be protected in real terms.

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"Now is not the time for further police cuts; now is the time to back our police and give them the tools do the job," said Mr Osborne, who had been under pressure to protect police funding in the wake of the Paris terror attacks.

Policing was among the unprotected areas that had been told to draw up plans for major spending cuts.

The Chancellor also said he could abandon the controversial cuts of £4.4bn to tax credits due to improvements in public finances.

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

To cheers from Conservative MPs, he told the Commons: "I've had representations that these changes to tax credits should be phased in.

"I've listened to the concerns. I hear and understand them.

"And because I've been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether."

Better tax receipts and lower debt interest resulted in a £27bn improvement in public finances compared with the July Budget.

Mr Osborne told MPs the Spending Review was designed to make Britain "the most prosperous and secure of all the major nations of the world".

He added: "Our job is to rebuild Britain - build our finances.

"The forecast I present shows that after the longest period of rising debt in our history, this year our debt will fall and keep falling in every year that follows."

The deficit, he said, would be 3.9% of national income this year, then 2.5% in 2016/17 and 1.2% and 0.2% in subsequent years, before moving to surplus of 0.5% in 2019/20 and 0.6% the following year.

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

There will be permanent exceptions from steel and other industries from green levies and the £15m raised each year from VAT on tampons will be used to fund women's health and support charities.

Local authorities with responsibility for social care are to be allowed to levy a new precept of up to 2% on council tax, bringing almost £2bn more into the care system.

The Chancellor also committed to a £10bn real-terms increase in the health service budget, with the first £6bn delivered up front next year.

This would see the NHS budget rise from the current £101bn to £120bn by 2020/21.

However, the NHS will have to find £22bn in efficiency savings in England, while the Department of Health is to cut 25% from its Whitehall budget.

While scrapping the cap on student nurse numbers will create up to 10,000 new training places, direct grants will be replaced with loans.

Elsewhere, a payroll levy of 0.5% will be imposed on companies to fund apprenticeships.

The change, to be introduced in April 2017, will raise £3bn, although a £15,000 allowance means only employers with wage bills of more than £3m will pay it.

HM Revenue and Customs is to have to make savings of 18% in its own budget and invest an extra £800m in the fight against tax evasion, while the Department for Transport will see its funding cut by 37%.

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

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

There will also be a new 3% surcharge on stamp duty for buy-to-let properties and second homes from April 2016, raising almost £1bn.

Mr Osborne said: "We'll reinvest some of that money in local communities in London and places like Cornwall which are being priced out of home ownership."

The Chancellor announced there would be a 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.

Ageing jails including Holloway in London are to close and the sites sold to allow £1bn to be spent on nine new prisons.