UK backs off cuts to tax breaks for lower income households

Staff Writer
Columbus CEO

LONDON (AP) — Britain's Treasury chief abandoned controversial cuts in tax credits for the working poor and refrained from slashing funding to the police on Wednesday as he updated Parliament on the government's tax and spending plans.

George Osborne said improvements in public finances made it possible to back away from the unpopular credit cuts his government had proposed earlier. As members of his party cheered, Osborne said he accepted the concerns of those who feared the impact on people making minimum wage.

"I've listened to the concerns. I hear and understand them," he said. "And because I've been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether."

The move was made possible by higher than predicted tax receipts and lower interest rates. The Office for Budget Responsibility, an independent agency, estimated that public finances would be 27 billion pounds ($40 billion) better off next year than it had forecast in July.

The 4.4 billion in cuts had been blocked earlier in an unusual move by the upper house of Parliament, the House of Lords, in April.

Despite the U-turn on tax credits, Osborne promised to keep in place 12 billion pounds of cuts from the welfare budget over the next five years. The cuts were promised by the Conservative Party during the last election.

He also announced plans to boost property ownership as he delivered the so-called Autumn Statement, one of two showpiece budget updates.

Osborne announced plans to help build 400,000 affordable homes, a decision that had prompted British newspapers to print images of him in a hard hat and describe him as "George the Builder." The move will be popular because of strains throughout the country on property prices.

"We are the builders!" he said to cheers.

But the statement also detailed deep cuts in public spending on social care, renewable energy and local government. In a surprise move, no cuts were made in policing, though they had been anticipated.

Osborne also pledged that the 15 million raised each year from taxes on feminine hygiene products would be used to fund women's health and support charities. Women have been protesting the tax, arguing that such products are not a luxury item.

In accompanying economic forecasts, the Office of Budget Responsibility predicted economic growth of 2.4 percent in 2015, 2.4 percent in 2016, and 2.5 percent in 2017.