Autumn Statement 2015

3 Dec 2015

On 25th November Chancellor George Osborne published the Conservative government’s first Autumn Statement.  Published jointly with the Spending Review, the Chancellor announced how he plans to move Britain into a higher wage, lower tax, lower welfare society.

The Chancellor’s Spending Review promises to drive economic and national security and provide the foundations for ‘rebuilding’ Britain.  The £4 trillion spending plan over the next 5 years is projected to reduce the national debt, with surplus forecasted to reach £10 billion by 2019-2020.

The Spending Review announced protected budgets for policing, health, education, international aid and defence, as well as a complete reversal of tax credit reforms – a plan which was widely criticised earlier this month by both the opposition and members of the Conservative party. Below is a summary of key points from the Spending Review, focusing on those which are related to financial inclusion.

Tax credit

Since tax credits will remain unchanged, the government will have to borrow £8 billion less than forecasted. It was acknowledged that tax credits would be phased out anyway as Universal Credit continues to roll out. As announced at the summer budget, from April 2016 the amount a tax credit claimant’s income can increase in-year compared to their previous year’s income before their award is adjusted will be reduced to £2,500. The government will propose no further changes to the Universal Credit taper, or to the work allowances beyond those that already passed through Parliament.


The government introduced a Help to Buy scheme especially for London which will give house buyers an interest –free loan of up to 40% of the value of a new-build home from early 2016, as opposed to 20%, as the current scheme offers.  The £2bn housing budget will also see that 400,000 affordable new homes are built by the end of the decade, with half of these being ‘starter homes’ and 135,000 to be part of the Help to Buy: Shared ownership scheme.  This scheme will be open to all households earning less than £80,000 outside London and £90,000 in London.  To reduce homelessness the government will provide £40 million for services for victims of domestic abuse.  The government will also end the current management fee for temporary accommodation for local authorities to give them more funding to tackle homelessness.

Further announcements in Spending Review included:

Local Authorities

  • Councils will be given more powers over decision making in their local areas.
  • They will be able to add 2% to council tax to pay towards social care in their areas, if they wish.
  • From 2020 Councils can keep the money collected from Business Rates and spend it on repairs, transport etc.
  • From next April the amount that police services receive from council taxes can increased by 2%.

Pensions and ISAs.

  • The basic state pension will rise to £119.30 per week, an increase of £3.35.
  • Innovative Finance ISA will launch next year- allowing savers to enjoy the benefits of an ISA account on peer to peer loans.

Free childcare

  • The new 30 hour free childcare will be limited to families in which both parents earn at least £125 a week, equivalent to 16 hours at the National Living Wage, and earn no more than £100,000 each a year.
  • The government will also introduce Tax-Free Childcare from early 2017 to provide up to £2,000 a year per child to help working parents will their childcare costs.


  • The Warm Home Discount scheme will also be extended to 2020-2021.
  • The current Energy Companies Obligation runs out in March ’17 and there will be a new cheaper energy supplier obligation to reduce carbon emission.
  • This means households will save around £30 per year on their energy bills from 2017.
  • The government will increase funding for the Renewable Heat Incentive to £1.15 billion by 2020-21.


  • Changes to the insurance market mean that people will no longer be able to get cash compensation for minor whiplash claims. As a result, it is expected that annual insurance costs for drivers could fall by £40 to £50 a year.

The response from commentators has been that:

  • The reversal on tax credit was welcomed, however there will still be millions of families worse off by 2020 despite the reversal on tax credits
  • There is doubt that Osborne will actually be able to raise the surplus intended and it is likely that he will have to revisit his plans.
  • There is concern that  the Chancellor hasn’t listened to warnings about the risks of Help to Buy fuelling another housing bubble.

Director of the Resolution Foundation, Torsten Bell said:

“On tax credits it is very welcome that the vast majority of families will not see losses next April. The chancellor has done the right thing by reversing these tax credit cuts entirely, rather than fudging the issue.

However Universal Credit is the big loser because the cuts to it have not been reversed. Millions of low-income working families are still set to be significantly worse off by the end of the parliament if the Universal Credit roll-out goes ahead as planned. Pain tomorrow is better than pain today – but it is still pain.”

The Chancellor has toned down his plans to shrink the state. But we will still see large cuts that radically change what that state does. By the end of the parliament, the state will be focused on delivering healthcare and paying pensions, but will do much less to support young people or those on low-incomes.”

Julia Unwin, Chief Executive of the Joseph Rowntree Foundation, has said 

“We are of course pleased to see that George Osborne has responded to concerns about Tax Credit cuts and a lack of affordable housing in today’s speech. After taking steps to tackle low pay with the National Living Wage in the Summer Budget, it’s good to see that the Chancellor is now providing extra money for house building. However, focussing Government support only on homes for sale will do nothing to help anyone who is not able to save a deposit or get a mortgage. Even so-called ‘affordable’ home ownership is out of reach for low earning households – fewer than three per cent of new social tenants could afford a starter home or shared ownership property.

“Cancelling the Tax Credit cuts will be welcomed by low-income working families in the short-term. But many working families will still find themselves worse off due to upcoming reductions to Universal Credit. By 2020, families with children will be better off only if both parents work full time on the National Living Wage – something only a small minority of families can manage.”