Autumn Statement 2015

The Chancellor today set out the state of the economy in his Autumn Statement and revealed his spending plans for the next four years.

Calling his government the ‘guardians of economic security’, Chancellor George Osborne pledged to ‘rebuild Britain’ and said that ‘economic and national security’ was at the heart of his Spending Review. It would be, he promised, an economic recovery felt across all parts of the nation.

The Chancellor controversially scrapped planned cuts to tax credits altogether, rather than ease their impact. He announced that £12bn of welfare savings will be delivered in full.

He had been expected to raid other budgets to cover the £4.4bn cost, but he said that was not now needed because of higher tax receipts.

The key points in his Spending Review are as follows:

State of the economy

– Growth of 2.4% forecast for 2015, unchanged from June
– Growth in subsequent years is forecast to be 2.4% in 2016, 2.5% in 2017, 2.4% in 2018 and 2.3% in 2019
– UK is fastest-growing economy, alongside US, since 2010

Public borrowing/deficit

– Budget surplus of £10.1bn to be delivered on schedule by 2019-20
– Borrowing to total £73.5bn this year, falling to £49.9bn, £24.8bn and £4.6bn in subsequent years
– Debt to be lower in 2015-16 than 2014-15 and to fall every year after that
– Debt forecast: 82.5% of GDP in 2015-16, 81.7% in 2016-17, 79.9% in 2017-18, 77.3% in 2018-19, 74.3% in 2019-20 and 71.3% in 2020-2021.

Spending Review headlines

– Planned £4.4bn in tax credit cuts to be abandoned, with taper and threshold rates for working tax credits and child tax credits remaining the same
– Government to breach overall welfare cap, as a result, in first years of Parliament
– Total spending to rise from £756bn this year to £821bn by 2019-20
– Public spending figures: £756bn in 2015-16, £773bn in 2016-17, £787bn in 2017-18, £801bn in 2018-19 and £821bn in 2019-20.
– State spending to hit 36.5% in five years – down from 45% in 2010.
– Day-to-day department spending to fall by 0.8% each year, lower than in the 2010-15 Parliament
– Environment and Energy departments to see day-to-day spending fall by 15% and 22% respectively

Defence and foreign aid

– The UK will meet the UN target of 0.7% of national income spent on foreign aid.
– The UK will meet the NATO target of 2% of GDP spent on defence.
– By 2020-21, the defence budget will rise to £40bn from £34bn today
– Foreign Office budget to be protected in real terms

Police, security and justice

– No cuts to police budget at all in England and Wales.
– Holloway women’s prison in London to close as part of modernisation of prison estate
– Victorian jails to be sold and replaced by nine new prisons

Welfare and tax credits

– £12bn in targeted welfare savings to be delivered in full
– Housing benefit for new social tenants to be capped at same level as private sector
– Housing benefit and pension credit payments to be stopped for people who leave the country for more than one month
– Department of Work and Pensions budget to be cut by 14%
– Job centres to be co-located in council buildings
– New Jobseekers Allowance claimants will have to visit a job centre every week for 3 months

Health

– NHS budget, currently £101bn, to rise to £120bn by 2020-21
– The health service to get upfront cash injection of £6bn next year
– NHS in England expected to make £22bn in efficiency savings
– Department of Health to have 25% cut in Whitehall budget
– An extra £600m earmarked for mental health services
– Grants for student nurses to be scrapped and replaced by loans
– Cap on training places for nurses scrapped, with goal of increasing numbers by 10,000
– New social care ‘precept’ in council tax of up to 2% to allow local councils to raise £2bn for social care
– Better Care Social Fund to be increased by 1.9%
– £15m raised from charging VAT on sanitary products to be given to women’s health charities

Education

– Schools budget in England protected in real terms
– School funding formula to be phased out
– Total financial support for education to increase by £10bn
– 500 new free schools and university technical colleges to be opened
– New 30-hour free childcare subsidy for parents of three- and four-year-olds to be limited to those working more than 16 hours a week
– Funding for Further Education colleges to be ‘protected in cash terms’
– Sixth form colleges will be allowed to become academies

Housing and local government

– Local government to keep revenue from business rates by the end of the Parliament
– Cabinet Office budget to be cut by 26%
– Housing budget doubled to £2bn
– 400,000 new affordable homes to be built by the end of the decade
– 135,000 Help-to-Buy shared ownership homes to be built.
– 200,000 starter homes to be sold at 20% discount to under 40s
– New rate of stamp duty for buy-to-let homes
– Councils to receive an additional £10m to help homeless people
– Councils allowed to spend 100% of receipts from asset sales
– Local government spending, in cash terms, to be same in 2020 as 2015
– Social housing tenants to have housing benefit capped at private sector levels
– Housing benefit and pension credit payments to be stopped for people overseas for one month

Business, science and the environment

– Extra £200m funding for flood defence
– Business department funding to be cut by 17%
– Small business rate relief scheme to be extended by one year
– 26 new enterprise zones to be created
– Uniform business rates to be abolished, with elected mayors allowed to raise rates under certain conditions
– HMRC to make 18% savings in its own budget through efficiencies
– Science budget to rise in real terms to £4.7bn
– Apprenticeship levy set at 0.5% of employer wage bill, with £15,000 allowance for all firms taking part
– More than 1m extra jobs to be created in the next 5 years

Pensions, savings and personal taxation

– State pension to rise by £3.35 a week to £119.30 next year
– Triple-lock on the value of the state pension to be maintained
– New single-tier pension payments of £155.65 for new pensioners from next year
– Savings credit to be frozen at current level
– Every individual and small business to have their own digital tax account by the end of the decade
– New energy scheme to save an average of £30 a year from household bills
– £800m in extra funding to tackle tax evasion
– Devolution of income tax to Wales will take place without a referendum

Infrastructure, transport and culture

– Day-to-day spending at Department of Transport to fall by 37%
– Capital funding of transport projects to rise by 50% to £61bn
– £250m support for motorways in Kent to relieve pressure caused by Operation Stack
– Culture department to see funding cut by 2%
– Extra cash for Arts Council and UK Sport
– Free museum entry maintained
– Northern Ireland block grant to be more than £11bn by 2019-20
– Welsh block grant to reach almost £15bn by 2019-20
– Scottish block grant will be over £30bn by 2019-20
– Funding for Scotland, Wales and Northern Ireland Offices to be protected in real terms

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