CUTS to tax credits have been scrapped and new tax powers are to be given to Wales, the chancellor George Osborne revealed in his spending review today.

Control over some of the income tax collected in Wales can be handed back to the Welsh government without a referendum, the chancellor also announced – meaning Welsh ministers could control £3 billion of taxes a year by 2020.

In his spending review, Mr Osborne promised money spent on devolved services in Wales would not fall below £115 for every £100 spent in England.

Block grants to the Welsh Government are set to rise to just under £15 billion by 2019/20 – up from £14.4 billion of block grants in the 2015/16 budget.

Speaking earlier, Mr Osborne announced the u turn on tax credits because of “improved public finances”. He said: “I’ve listened to the concerns. I hear and understand them.”

238,000 families in Wales were due to have their benefits cut in April under Mr Osborne’s original plan.

The chancellor also revealed the UK government is borrowing £8 billion less than expected and is forecast to reach a surplus of £10.1 billion by the end of the Parliament – more than previously announced.

But he revealed £20 billion in budget cuts to the transport, energy and climate change, business, culture and other departments.

Also revealed was an increase in the basic state pension from next year from £3.35 to £119.30 a week - the biggest rise in 15 years.

He also pledged £6 billion extra NHS funding, £600 million extra funding for mental health and local authorities allowed to levy a two per cent on council tax for social care provision.

The chancellor also promised no cuts to the police budget and 400,000 affordable new homes by the end of the decade.

But the Welsh minister for finance, Jane Hutt, called it another “smoke and mirrors spending review”.

Speaking about the Wales budget, she said: “The reality looks like an overall real terms cut to our Budget.

She added: “Nothing to relieve the ongoing and significant pressures on public services in Wales.

“Don’t be misled that Wales is doing better through the spending review than other comparable parts of the UK– it’s not the way Barnett works.”

Kirsty Williams, leader of the Welsh Liberal Democrats, welcomed the news on devolution and income tax funding but raised concerns.

She said: ““Tax varying powers will bring much needed accountability to Wales’ political system. For too long successive Welsh Governments have been able to spend money without having the responsibility for raising it.”

But she said she is concerned the government is continuing to “drag their heels” on providing a commitment to fund the Cardiff city deal.

The Welsh Government has been pushing for the HM Treasury to match fund their £580 million contribution to make a deal worth nearly £1.3 billion.

She said: “There appears to have been no progress on this whatsoever since the election and that is a concern.”

Stephen Crabb, secretary of state for Wales, called today’s statement a “landmark spending review” for Wales.

He tweeted: “Commitment to Cardiff City Deal, Welsh funding protection, and new tax powers to help transform economy.”

Nick Ramsay, Welsh shadow minister for finance and AM for Monmouth, said: ““From support for the Cardiff City Deal to a rubber-stamped funding floor providing financial guarantees; this is an historic spending review that will benefit everyone in Wales.”

Leader of the Welsh Conservatives Andrew RT Davies AM, welcomed the review.

He said: “An additional 900 million in capital funds is extremely positive and - if used correctly - has the potential to benefit everyone in Wales.

“A deal on a funding guarantee will ensure our country is never short-changed and income tax powers put Welsh government accountability at the top of the agenda.

“The chancellor’s decision on tax credits is also extremely welcome.

“Yet again, the harbingers of doom had it catastrophically wrong. This is incredibly good news for Wales and I welcome it wholeheartedly.”

 

*Elliott Buss, senior tax manager at Newport’s UHY Hacker Young chartered accountants, reviews the Autumn Statement and outlines how it is likely to affect you.

Chancellor George Osborne laid out surprisingly wide-ranging reforms in the first Autumn Statement by a majority Conservative Government in almost two decades.

Tax credits were the overarching economic issue going into the speech, with many wondering how Mr Osborne would confront the Government’s defeat on this particular issue in the House of Lords.

Rather than introduce a diluted version of his previous plans, the Chancellor surprised everyone by announcing that the £4.4bn in cuts would be scrapped altogether, citing “improved” public finances and the fact he’s listened to “public concerns”.

He attempted to downplay the changes by saying that “tax credits were being phased out anyway as the Government introduced universal credit”.

By keeping money in people’s pockets the Chancellor has hopefully bolstered spending power in the population in the short term which will be welcomed by industry, the retail sector in particular.

Another item which will be welcomed by Gwent area firms was the announcement that the rate-relief scheme for small businesses would remain in place for 2016. On the other hand firms will await with interest the local impact of the Chancellor’s confirmation yesterday that he would be abolishing uniform businesses rates and allowing councils to set their own rates and keep 100% of the receipts. There are bound to be winners and losers in this process.

The rumours of major housing announcement came true with a doubled housing budget and a commitment to “400,000 affordable new homes” by 2020.

While those looking to get into the housing market may benefit, landlords will not. Following the cap on interest deductions against rental income announced in the Budget, he announced a 3% increase in stamp duty for second homes and buy-to-let properties.

The Chancellor disclosed in the statement that devolution of income tax powers to Wales can now take place without a referendum. This might unnerve some who might be concerned that Wales may become less attractive to investors but will no doubt be welcomed by committed devolutionists. He also disclosed the Welsh block grant will be “close to £15bn by 2019/2020.

Finally Mr Osborne also attempted to reach out to women and families. From 2017 he announced that 30 hours of free childcare would be available to parents working 16 or more hours a week, and that the revenue from the controversial ‘tampon tax’ would help fund women’s health charities.