Today, George Osborne stepped back from the brink. The Chancellor has reversed his calamitous plan to tear away tax credits from the working poor, and will instead phase in the new system so no one will lose out. And he has also abandoned his reserve plan: to pay for this by raiding Universal Credit. In other words, he has done precisely what The Spectator has been calling for him to do and, in his expensive U-turn, safeguarded the Conservatives’ right to be called the workers’ party.
I didn’t quite believe this when he first announced it; over the years a gap has emerged between what the Chancellor says in the chamber and what the small print of his budget reveals. But this really does seem genuine. It’ll cost him £3.5bn in year one, falling to £500m later on. He plans other cuts (he’ll restrict Pension Credit and housing benefit for those who spend long periods out of the country, and introduce a lower sharers’ rate of housing benefit for social housing, etc). But the low-paid workers, who never asked to be caught up in a maze of tax credits and in-work benefits, are not going to be made worse off. An important principle has been defended today: if you work hard and do the right thing, the Conservative Party will support you.
All told, Osborne plans to spend about £83 billion more over the parliament than he had led us to believe in the summer. This will be financed by £47bn of tax rises (including a council tax hike and a pension fund raid) and about £33bn of deeper welfare cuts.
There’s a £6bn giveaway this year, and it’s not (as ministers have been hinting) because the recovery is doing so well. It has more to do with the falling interest rates on the borrowing – he now expects to fork a cumulative £19 billion less in debt interest over the course of this parliament. He expects to be paying 3.1pc on debt by 2020, rather than 3.3pc. A tiny difference, that leads to a whole lot of cash. Interest rates can go up as well as down, of course – this saving could disappear in the heartbeat; but Osborne has spent the money anyway.
But for now, the most important point is that Osborne has swallowed his pride and dropped his planned tax credits raid – and, in so doing, saved his reputation. And the finances of the low-paid workers to whom the Conservative Party ought to be dedicated.
Join The Spectator’s Andrew Neil, Fraser Nelson and James Forsyth on 26 November to discuss George Osborne’s Autumn Statement. Click here for more information and to book tickets.