The chancellor George Osborne drops his plan to tax credit cut which due in April, using an unexpected £27bn fiscal windfall in a bid to defuse a damaging political row.
Osborne tax credit cut could have forced millions into poverty and cost low-income families an average of £1,000 a year. He was facing growing pressure from Tory MPs whose constituents were affected and he was also forced to think again by the House of Lords.
While he was delivering his autumn statement on Wednesday, Osborne said higher than expected tax revenues and lower interest payments on government debt had opened up an extra £27bn of fiscal wriggle room, which would allow him to cancel the £4.4bn cuts altogether.
To Tory cheers, he told the Commons: “I’ve had representations that these changes to tax credits should be phased in. I’ve listened to the concerns. I hear and understand them. 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. Tax credits are being phased out anyway as we introduce universal credit.”
