BRITAIN’S struggling workers were saved from a £1,300-a-year income hit
yesterday as George Osborne pulled a U-turn on his tax credit cuts.
The Chancellor had promised to look again at the hugely controversial move to
slash £4.5billion from the welfare budget.
But instead of easing the pain, Mr Osborne stunned MPs by binning the entire
plan.
He told the Commons: “I’ve listened to the concerns, I hear and understand
them.
“The simplest thing to do is not phase these changes in but avoid them
altogether.”
The rethink to soften the blow on the poorest before big rises in the National
Living Wage come in was forced on the Chancellor by a major rebellion of
Tory MPs.
His U-turn was also prompted by a withering House of Lords defeat last month.
Conservative and Labour politicians welcomed the decision.
Leading the praise, London Mayor Boris Johnson, who campaigned alongside The
Sun to ease the pain on workers, said: “Yes this is a system that needs
reforming, but hard-working people in Britain must be protected.”
Boris, Mr Osborne’s main rival to succeed David Cameron as PM, also heaped
praise on The Sun.
He added: “Full credit to The Sun for drawing attention to this issue.”
Key points from the Chancellor’s Spending Review:
– Plans to cut £4.4bn from tax credits for low earners ditched
– Council tax bills could rise by £250 by 2020 in new “precept”
to allow local councils to raise cash for social care for elderly
– Massive investment in house building including £1bn tax on second homes
to help hardworking Brits onto the housing ladder
– Police, health, education and defence budgets safeguarded
– Buy-to-let landlords will be hit with a three per cent charge on stamp
duty on every home in a bid to open up the market
– State pension up by £3.35 a week
– NHS handed £3.6bn cash injection – with an extra £600m given to mental
health services
– ‘Tampon tax’ used to give £15m to fund women’s health charities
Tory rebel Stephen McPartland, who defied a three-line whip over the issue,
said he was “delighted the Chancellor has listened”.
Veteran Labour MP and Work and Pensions Committee chairman Frank Field branded
the U-turn “a question of justice”.
Mr Field added: “From today’s statement, Britain’s strivers emerged as the
winners.”
An expected £1billion cut to housing benefit considered by Mr Osborne instead
of the tax credits cuts was also not pushed through, with only a few hundred
million lopped off it.
With no further benefit bill trimmings elsewhere, Mr Osborne had to admit to
the Commons yesterday that he will exceed his own £115billion annual cap on
welfare spending by more than £4billion.
The new rule was only set in July as a trap for Labour, and the embarrassed
Chancellor also had to concede he will now not be able to stay within the
cap until 2018.
Not cutting the welfare bill further, and an extra £4billion for the NHS and
social care, will take state spending on older people and healthcare to a
record 42.3 per cent.
But Treasury officials insisted Mr Osborne will still fulfil his election
manifesto pledge to cut £12billion from the welfare bill by 2020 when
Universal Credit will have been rolled out across the country.
The major reform packages put every working-age state handout into one, to
ensure work always pays more than staying at home.
Labour insisted there will be pain for new claimants who will get a lower
figure than today’s level of support when Universal Credit is introduced.
But economists said the income of low-paid Brits in work today will not be
affected under Universal Credit.
The Institute for Fiscal Studies’ economist Carl Emmerson said: “Sun readers
who are on tax credits and feared they were losing a lot of money can now
sleep safely.”
The U-turn also allowed the Chancellor to return to the language of the
political centre and continue his land-grab from Labour’s traditional
territory.
Calling yesterday’s blueprint “the spending review of a one-nation
government”, he also dubbed the PM’s team “the mainstream representatives of
the working people of Britain”.
Charities also welcomed Mr Osborne’s rethink.
Barnardo’s chief executive Javed Khan said: “Many of the struggling families
we work with will currently be cheering the Chancellor for protecting
lifeline tax credits, which help them buy essentials like food and school
uniforms.”
But right-wingers attacked him for not being tough enough. Ukip branded the
blueprint “a Blairite Budget from a spend-and-borrow government”.
The anti-EU party’s economics spokesman, ex-MP Mark Reckless, said: “It is
evident Ukip is now the only tax-cutting party.”
Reversing the cuts will cost the Government £9.4billion over the next five
years and £3.4billion in 2016-17 alone. It was paid for by an unexpected
windfall in predicted tax receipts over the next four years.
Tax credit timeline
1997-2001: Labour Chancellor Gordon Brown introduces Working Families
Tax Credit for the low paid.
2003: It is split into Child Tax Credits and Working Tax Credits.
2010: The new Tory and Lib Dem Coalition make only minor changes to
tax credits.
2015: 4.5million people claim tax credits — 4million with children. Costs
hit £30billion — 14 per cent of the £220bn welfare budget.
MAY 2015: The Tories win a majority. The PM promised he would not cut
Child Tax Credits before the election.
8 JULY 2015: Chancellor George Osborne proposes lowering the earnings
level for tax credits from £6,420 to £3,850 from April 2016.
5 OCTOBER 2015: The Sun warns the PM he is making a mistake and
starts campaigning to delay the changes. The Institute for Fiscal
Studies says the changes would cost three million families an average
£1,000 a year.
26 OCTOBER 2015: The Tories are defeated in the Lords by a Labour
amendment calling for a delay to tax credit changes. Osborne vows to “think
again”.
YESTERDAY: The Chancellor promises not to change tax credits after
campaigning by The Sun and others.
WHAT NEXT?
2018: Tax Credits begin to be phased out altogether and replaced by Universal
Credit.