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Following the Chancellor’s statement please find a round-up of the key headlines and announcements by sector below.
“Today, as we present this Spending Review, our job is to rebuild Britain. Build our finances. Build our defences. Build our society,” said Chancellor George Osborne beginning his statement.
OBR and Top Economic Lines
The OBR has forecast that the UK will grow by 2.4 per cent this year, 2.4 per cent in 2016 and 2.5 per cent in 2017.
In July the national debt was forecast to be 83.6 per cent of national income this year. At the Autumn Statement, this forecast is now 82.5 per cent. This is forecast is set to fall reaching 71.3 per cent in 2020-21.
The deficit this year is set to be 3.9%. Next year falling to an estimated 2.5%.
This year public spending will be £756bn, reaching £857bn in 2020-21.
The Chancellor set out the four main goals of the Spending Review:
1. To develop a modern, integrated, health and social care system that supports people at every stage of their lives.
2. To spread economic power and wealth through a devolution revolution and invest in our long term infrastructure.
3. To extend opportunity by tackling the big social failures that for too long have held people back in our country.
4. To reinforce our national security with the resources to protect us at home and project our values abroad.
Devolution, Communities and Local Government
Housing was the big focus in Communities and Local Government:
The housing budget will be doubled to £2bn.
Measures to increase housebuilding and home ownership include:
– 400,000 more affordable homes will be built, half of which will be starter homes.
– From midnight tonight, Right to Buy will be available for tenants of five housing associations.
– Public land will be made available for 160,000 homes and re-designating unused commercial land for Starter Homes.
– London Help to Buy – Londoners with a five per cent deposit will be able to get an interest-free loan worth up to 40 per cent of the value of a newly-built home.
– New rates of Stamp Duty that will be three per cent higher on the purchase of additional properties like buy-to-lets and second homes.
– Housing benefit for new tenancies in the social rented sector will be set at the rate of the local housing allowance, there will also be restrictions claims for housing benefit and pension credit payments on those who have left the country for more than a month.
– The Temporary Accommodation Management Fee will be removed from the benefits system, with local authorities taking on more responsibility in supporting homeless people – with the proposal for some of the administration of housing benefit to be devolved.
Further announcements in this area included:
– £12bn for the Local Growth Fund as already promised.
– Creation of 26 new or extended Enterprise Zones, including 15 zones in towns and rural areas
In the devolved regions:
– The Welsh block grant will reach almost £15bn by 2019-20 – while the capital spending will rise by over £900m over five years.
– The Northern Ireland Executive will be able to negotiate the devolution of corporation tax.
– The funding of the Scotland, Wales and Northern Ireland Offices will all be protected in real terms.
Employment and Skills
Osborne confirmed that the £12bn of welfare savings committed to at the election by the Conservatives would be delivered in full.
14 per cent in savings will be made to the resource budget of the Department for Work and Pensions, and the Cabinet Office budget will be cut by 26 per cent.
Headline announcements included:
– £4.4bn tax credit cuts will be scrapped altogether. There will also be no further changes to the universal credit taper, or to the work allowances beyond those that passed through Parliament next week.
– The minimum income floor in Universal Credit will rise with the National Living Wage.
– Will set a lower welfare cap at the Budget 2016.
– Housing benefit and pension credits will no longer be paid to anyone who has left the country for more than one month.
– A new apprenticeship levy will be introduced from April 2017. The apprentice levy rate will be set at 0.5 per cent of an employer’s pay bill – every employer will receive a £15,000 allowance to offset against the levy.
– Next year the basic State Pension will rise by £3.35 to £119.30 a week.
Business and Taxation
The BIS budget will be reduced by 17 per cent. 18 per cent efficiencies were announced for HM Revenue and Customs.
Key announcements in this area include:
– An extra £800m in the fight against tax evasion
– Every individual and every small business will have their own digital tax account by the end of the decade, in order to manage their tax online.
– Abolition of the uniform business rate, with local government allowed to cut rates and keep all revenue raised by 2020.
– Extension of the small business rate relief scheme for another year.
– £165m of new loans to companies instead of grants.
– Capital gains tax to be paid within 30 days of completion of any disposal of residential property.
– Income tax to reach 36.5 per cent by 2020.
– Corporation tax in NI to be set at 12.5 per cent.
– Devolution of income tax to Wales can take place without a referendum.
– Commitment to the same level of support for aerospace and automotive industries for the next decade.
– Spending on new catapult centres will increase.
– Until EU rules change to abolish it entirely, the £15m a year raised from the ‘Tampon Tax’ will be used to fund women’s health and support charities.
Already announced earlier this week: http://bit.ly/1NsseyS
– The NHS will receive an additional £10bn a year above inflation by 2020, with £6bn frontloaded in the first year, next year.
– The Department of Health will receive £4.8bn in capital funding in every year.
– £300m more spent on cancer diagnostics every year by 2020/21.
– Over £500m, meanwhile, will be invested in new hospitals including in Cambridge, Brighton, and Sandwell.
In his statement the Chancellor said “The first priority of this government is the first priority of the British people – our National Health Service.”
Extra support for mental health services was announced in the statement. £600m in additional funding will be spent on talking therapies, perinatal mental health services, and crisis care.
Local authorities responsible for social care will be able to levy a new social care precept of up to two per cent on council tax. This will be spent exclusively on adult social care, bringing approximately £2bn more in to the care system.
The Better Care Fund is also being increased. Local authorities will have accesss to an extra £1.5bn by 2019/20.
Home Affairs and Justice
As one of the bigger announcements, Osborne announced that there would be no cut to police budgets at all. He committed to real terms protection for police funding.
He also announced a £700m investment in new technology in the justice system, from savings made from court efficiencies, that old Victorian prisons would be sold and Holloway Prison – the biggest women’s jail in Western Europe – will close.
International Affairs and Defence
As well as improving existing infrastructure, the new £1.9bn investment in cyber security (first announced last week) will fund the establishment of a National Cyber Centre, as well as a £165m Defence and Cyber Innovation Fund, two new cyber innovation centres and an incentive to open a new Institute of Coding.
The Government’s new aid strategy was published earlier this week: http://bit.ly/1NnuAPt . 50 per cent of the aid budget will be spent on fragile states and regions, security and a new £500m crisis reserve. This followed the announcement of a new fund in partnership with Bill Gates to tackle malaria and other infectious diseases worldwide: http://bit.ly/1MNetoW
The Strategic Defence and Security Review published earlier in the week commits Britain to spending two per cent of our income on defence.
The Chancellor announced today that the FCO budget will be protected in real terms.
The Department for Transport’s operational budget will fall by 37 per cent. However, transport capital spending will increase by 50 per cent to a total of £61bn.
DECC’s day to day resource budget will fall by 22 per cent.
Headline announcements across infrastructure included:
– London will get an £11bn investment in its transport infrastructure.
– Spending on energy research will be doubled with a major commitment to small modular nuclear reactors.
– Support for climate finance will be increased by 50 per cent over the next five years.
– Energy Intensive Industries, like steel and chemical industries, will be permanently exempt from the cost of environmental tariffs.
– £300m will be invested in delivering Ebbsfleet, the first garden city in nearly a century.
– £5bn on roads maintenance this Parliament.
– New quarter of a billion pound investment in facilities in Kent to help with road traffic following Operation Stack.
– Reform the Renewable Heat Incentive to save £700m.
– Introduction of a cheaper domestic energy efficiency scheme that replaces ECO.
DEFRA’s day to day budget falls by 15 per cent in this Spending Review
However, the Chancellor committed to £2bn to be spent on flood prevention.
Education, Science, Culture, Media and Sport
In Education the key announcements were:
– Schools budget protected in real terms.
– Total financial support for education, including childcare and our extended further and higher education loans, will increase by £10bn.
– An increase to the funding of nurseries by £300m.
– Sixth form colleges will be allowed to become academies so they don’t have to pay VAT.
– Continued funding for free infant school meals, protection for rates for the pupil premium, and an increase the cash in the dedicated schools grant.
– 500 new Free Schools and University Technical Colleges.
– Investing £23bn in school buildings and 600,000 new school places.
– Expansion of the National Citizen Service.
– Student finance – Part-time students will be able to receive maintenance loans, tuition fee loans for those studying higher skills in FE. Loans will also be extended to all postgraduates.
The science budget was protected so it in real terms so it rises to £4.7bn.
The DCMS core administration budget will fall by 20 per cent. Osborne committed to:
– Keeping free museum entry and to looking at a new tax credit to support their exhibitions.
– An increase in funding to the Arts Council and 29 per cent increase to UK Sport’s budget.
– No ‘raid’ to the Big Lottery Fund