In a typically boisterous Commons on Wednesday, news of an unexpected rise in tax receipts brought a very different budget than the one we were led to expect. The OBR (Office for Budget Responsibility) radically altered its forecast for public finances, predicting they will be £27bn better off by 2020. This came on the same day that Chancellor George Osborne announced his Spending Review and Autumn Statement, which included two significant U-turns. Listed below is the outline of what Mr Osborne said:

 

The Key Points:

  • Abandonment of £4.4bn planned cuts to Child and Working Tax credits, which was controversially defeated by the Lords last month
  • Reduction in Government spending by £8bn by 2020, leading onto an OBR predicted £27bn improvement in public finances
  • Cuts to many government departments, including Transport, Business, Energy and Environment
  • Police budgets no longer in line for cuts, spending to rise by £900m by 2020
  • Health budget set to rise by 18.8% from £101bn to £120bn by 2021, beginning with an immediate “cash injection” of £3.8bn
  • Education budget to rise by at least £10bn by 2020
  • VAT charged on women’s sanitary products, currently at 5%, will be donated to women’s charities (£15m guaranteed)

 

The Economy:

  • Growth forecast remains unchanged from July, at 2.4% in 2015-6
  • Borrowing to reach £73.5bn in 2015, falling to £49.9bn by 2016, and £4.6bn in 2018, and reaching surplus in 2019
  • Debt to fall to 82.5% by winter 2015 and 71.3% by winter 2021
  • State sharing, as a share of output, to fall 8.5% from 45% to 36.5% in 2020

 

Departmental Budgets:

  • In light of recent events across the world, the budgets of policing, defence and international aid will be protected
  • Both the Health and Education budgets will be protected as well
  • The transport department will see a 37% reduction in its budget, energy and climate change to be cut by 22%. The business department and Defra to see their budgets cut 17% and 15% respectively
  • Overall departmental spending to be reduced by 0.8% across the board (£20bn) by 2020

 

Welfare:

  • £12bn in welfare savings to be delivered despite U-turn over tax
  • Two-child claim limit to be placed on child tax credits, implemented by 2017
  • Department of Work and Pensions to see 14% reduction in budget
  • Welfare to be extended to an extra 1 million new claimants

 

Education:

  • Funding for further education colleges to be protected in real terms
  • Education budget to be protected in real terms
  • School funding formula in England to be phased out in the face of growing discontent among local councils and governors
  • Extension of free healthcare subsidies of up to 30 hours, but only for parents working 16+ hours a week

 

Health:

  • NHS England expected to make £22bn ‘efficiency’ savings by 2020
  • Extra funding ring-fenced for mental health of around £800m
  • Grants for student nurses to be replaced entirely by loans, as well as a removal of the national cap on student nurses, with an aim of recruiting an extra 10,000 nurses by 2018
  • Local councils will be obligated to provide up to 2% of levied tax to raise £2bn for social care

 

Local Government, Housing and Infrastructure:

  • As expected, the Chancellor announced that local councils will keep all revenue received from business rates by 2020
  • Local Councils to receive an effective cut in funding, seeing a reduction in real terms, but equilibrium in cash terms
  • Special £10m fund for local councils to aid homeless people
  • Stamp duty on buy-to-let and second homes to see 3% surcharge from April next year, totalling £1bn
  • New 400,000 homes project in England worth £2.3bn to be handed to private developers
  • Funding of transport projects to rise by around 50% by 2020
  • £250m for Operation Stack, and other contingency plans around the Channel Tunnel
  • “Maximum allocation of funds” given to the electrification of the Trans-Pennine, Great Western and Midland Mainline
  • £250m pothole fund over 5 years, despite repairs on local roads cost £8.6bn

 

The Rest:

  • Science budget to see a rise of £4.7bn in real terms over the next Parliament
  • Funding for flood defences and other disaster relief to be protected in real terms
  • Apprenticeships tax rates set at 0.5% of the employer’s wage bill
  • State pensions set to rise by an average of £3.35 a week, to an average of £119.30
  • Maintenance of free museum entries to be kept throughout the Parliament
  • 26 new ‘enterprise’ zones to be established in England and Wales