George Osborne has pledged to create a “higher wage, lower tax, lower welfare” Britain as he unveiled the first Tory-only Budget for nearly 20 years.
George Osborne hailed the budget, which includes a four-tear freeze on working-age benefits, the scrapping of university maintenance grants and cuts in corporation tax, as a budget for the “working people of Britain”.
Delivering his first Tory-only budget, Mr Osborne said the government would transform the UK into a “low tax, low welfare, high wage” society.
A budget for working people? How can he make that claim when he is making working people worse off. Harriet Harman
Mr Osborne said: “It was the Conservatives who first protected working people in the mills, it was the Conservatives who took the great steps towards state education, it was the Conservatives who introduced equal votes for women, it was the Conservatives who gave working people the right to buy so of course it is now the Conservatives who are transforming welfare and introducing the national living wage.”
His budget was ridiculed by Acting Leader of the Opposition Harriet Harman.
“The Chancellor is said to be liberated without the ties of coalition holding him back but what we’ve heard today suggests his rhetoric is liberated from reality,” she said.
“A budget for working people? How can he make that claim when he is making working people worse off by cutting tax credits and scrapping grants for the poorest students.”
The government is making £12bn of cuts to welfare and Mr Osborne said the budget would mean that, with welfare savings and tax cuts, the typical family “where someone is working full time on the minimum wage” would be better off.
The cuts to welfare include a freeze on working age benefits for four years including tax credits and local housing allowance – though maternity pay and disability benefits are exempted.
Tax credits and Universal Credit will be restricted to two children in a family, affecting those born from April 2017 onwards and the income threshold for tax credits will be reduced from £6,420 to £3,850.
Young people are among those hardest hit by the budget, with the entitlement to housing benefit for 18 to 21-year-olds abolished. Student maintenance grants, designed to help the porest students, have also been scrapped and replaced with loans.
Rents in the social housing sector will be reduced by 1 per cent a year fot he next four years, the Chancellor said, and higher income households in social housing will be charged market rents.
Mr Osborne told the Commons that Britain “deserves a pay rise” and that the Tory government would deliver it.
From April next year a new “national living wage” will come into force for over 25s. It will start at £7.20 an hour, rising to £9 an hour by 2020. the Low Pay Commission will advise on future changes to the rate.
Mr Osborne said the pay increase would give an estimated 2.5m people an average increase of £5,000 over five years.
However, Mr osborne’s national living wage is still less than the National Living Wage as defined by the Living Wage Foundation – which says it should be £7.85 an hour across the UK and £9.15 in London.
The Chancellor also announced the NHS will receive a further £8bn by 2020, saying it was clear that the under-pressure health service is in need of additional government funding and so it would be getting the extra money on top of the £2bn already committed.
He told MPs the country “can only have a strong seven-day NHS if you have a strong economy”.
“Proof that the NHS is only truly safe in Conservative hands,” he added.
Mr Osborne said abolishing non-dom status altogether would “probably cost the country money”, but his plans would bring in an extra #1.5 billion in revenue.
“Many of these people make a considerable contribution to our public life and to tax revenues,” he said. “But there are some fundamental unfairnesses … It is not fair that people who are born in the UK to parents who are domiciled here, can later in life claim to be non-doms and live here.
“It is not fair that non-doms with residential property here in the UK can put it in an offshore company and avoid inheritance tax.
“From now on they will pay the same tax as everyone else.
“And most fundamentally, it is not fair that people live in this country for very long periods of their lives, benefit from our public services, and yet operate under different tax rules from everyone else.”
After a consultation, from April 2017 “anyone resident in the UK for more than 15 of the past 20 years will now pay full British taxes on all worldwide income and gains”.
Mr Osborne said new cars and motorbikes will not need MOTs for the first four years, rather than three.
Promising a plan to boost the UK’s lagging productivity, the Chancellor said a key part would be a new charge on big business to help fund another three million apprenticeships.
“Firms that offer apprenticeships can get more back than they put in,” he said. “Britain’s great businesses training up the next generation.
“The money will be directly controlled by employers and we’ll work with business on how to do this, it’s exactly the sort of bold step we need to take if Britain is going to raise its game.”
In a controversial move, Mr Osborne confirmed that student grants will be replaced by loans to save £1.6 billion.
“We have removed the artificial cap on student numbers so we don’t have to turn away people from our universities who want to go and have the right grades,” he said.
“But we can’t afford to do this unless we tackle the cost of student maintenance grants – that is set to almost double to £3 billion over this decade.
“There’s also a basic unfairness of asking taxpayers to fund the grants of people who are likely to earn a lot more than them.”
He added: “If we don’t tackle this problem then our universities will become underfunded and our students won’t get places – and I’m not prepared to let that happen.”