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25 November 2015

Spending Review and Autumn Statement: An analysis

Spending Review and Autumn Statement: An analysis

Ahead of this year's Spending Review and Autumn Statement the Chancellor George Osborne had made it clear that he expected to cut about £30 billion in government spending over the next five years.

The Spending Review, which sets out government spending, and the Autumn Statement, which provides an update on government plans for the economy, was highly anticipated. This was because it will significantly influence the next four years of this parliament, the framework for the next election and the day to day lives of individuals. It was also because making savings such as the Chancellor planned would inevitably lead to drastic cuts in services with the potential to dramatically impact British security, working families and our most vulnerable.

Ahead of the review, some economists predicted the Chancellor would miss his target to run a budget surplus by 2020, however Mr Osborne said his four-year public spending plans were forecast to deliver a surplus and then falling debt in every year that follows.

Stating that "economic and national security" were at the heart of his Spending Review, the Chancellor went on to outline where the £30 billion in budget cuts would come from. Transport, energy and climate change, business and other departments have had to find double digit percentage savings over the next five years.

Today saw the Chancellor completely scrap his plan to cut tax credits. In his summer budget, Mr Osborne announced a plan for a £4.4 billion cut to tax credits, which would see millions of low paid working families losing out on benefits to the tune of up to £1,200 every year. Due to unexpected and surprising opposition from the House of Lords, Mr Osborne was forced to rethink this. Today he said the cuts wouldn't be going ahead at all because of a higher than expected tax receipts.

Speculation that police spending would be cut weren't received well in light of recent terrorist attacks. In today's speech, Osborne pledged real terms increases to police funding, however, police will be required to share resources – it's yet to be confirmed what this means practically.

The government will continue with plans to cut £12 billion from the welfare budget. However the Office for Budget Responsibility has predicted the government will breach its own cap on welfare spending three times over the next five years.

The Chancellor announced that solving the housing crisis is his top priority and the government will push ahead with what treasury is calling the biggest housebuilding programme since the 1970s. The government's housing budget will double with £7 billion and money will be poured into a raft of programmes to build 400,000 new homes across England. This includes handing £2.3 billion directly to developers to build "starter homes" for first-time buyers and investing £4 billion into shared ownership schemes. Earlier changes to stamp duty as well as a three per cent surcharge on stamp duty for some buy-to-let properties and second homes from April 2016 are helping fund this investment.

NHS services in England will get a £3.8 billion, above-inflation, cash injection next year as part of an increase of £8 billion in real terms over the course of this parliament. In order to provide more funding for social care councils with a responsibility for social care will be able to add two per cent to council tax bills. Tax payers will have to wait until they receive their council tax bills to see if this results in an increase in their tax.

Defence spending will increase, as announced in Monday's Strategic Defence and Security Review. Schools and international aid have also escaped cuts.

Prior to the Chancellor's speech today, expectations were for drastic cuts, which would see working families and our most vulnerable suffer, along with concerns about police being able to aptly protect us especially in light of recent terrorist attacks and threats. The government's unexpected U-turn when it comes to tax credits as well as extra funding for police will go some way to allay these concerns. However, it still remains that the government is requiring significant cuts from many departments. Cuts that will no doubt impact on us all. These cuts come because the Chancellor believes getting back into surplus is the best thing for the country. Some would say these cuts are a choice rather than a necessity, while others would say it's imperative to make savings and get the deficit down while we can.