Spending Review and Autumn Statement

George Osborne Excerpts

Wednesday 25th November 2015 Commons Chamber

[The First Secretary of State and Chancellor of the Exchequer (Mr George Osborne)]

This spending review delivers on the commitment we made to the British people that we would put security first—to protect our economic security by taking the difficult decisions to live within our means and bring down our debt, and to protect our national security by defending our country’s interests abroad and keeping our citizens safe at home. Economic and national security provide the foundations for everything we want to support: opportunity for all, the aspirations of families and the strong country we want to build.

Five years ago, when I presented our first spending review, our economy was in crisis and, as the letter said, there was no money left. We were borrowing one pound in every four we spent, and our job then was to rescue Britain. Today, as we present this spending review, our job is to rebuild Britain—build our finances, build our defences, build our society—so that Britain becomes the most prosperous and secure of all the major nations of the world, and so that we leave to the next generation a stronger country than the one we inherited. That is what this Government were elected to do, and today we set out the plan to deliver on that commitment.

We have committed to running a surplus. Today, I can confirm that the four-year public spending plans that I set out are forecast to deliver that surplus so that we do not borrow forever and are ready for whatever storms lie ahead. We promised to bring our debts down. Today, the forecast I present shows that, after the longest period of rising debt in our modern history, this year our debt will fall and keep falling in every year that follows.

We promised to move Britain from being a high-welfare, low-wage economy to a lower-welfare, higher-wage economy. Today, I can tell the House that the £12 billion of welfare savings we committed to at the election will be delivered in full, and delivered in a way that helps families as we make the transition to our national living wage.

We promised that we would strengthen our national defences, take the fight to our nation’s enemies and project our country’s influence abroad. Today, this spending review delivers the resources to ensure that Britain, unique in the world, will meet its twin obligations to spend 0.7% of its income on development and 2% on the defence of the realm.

But this spending review not only ensures the economic and national security of our country, it builds on it. It sets out far-reaching changes to what the state does and how it does it. It reforms our public services so that we truly extend opportunity to all, whether it is in the way we educate our children, train our workforce, rehabilitate our prisoners, provide homes for our families, deliver care for our elderly and sick, or hand back power to local communities. This is a big spending review by a Government that do big things. It is a long-term economic plan for our country’s future.

Nothing is possible without the foundations of a strong economy, so let me turn to the new forecasts provided by the independent Office for Budget Responsibility, and let me thank Robert Chote and his team for their work. Since the summer Budget, new economic data have been published which confirm this: since 2010, no economy in the G7 has grown faster than Britain. We have grown almost three times faster than Japan, twice as fast as France, faster than Germany and at the same rate as the United States. That growth has not been fuelled by an irresponsible banking boom, like in the last decade. Business investment has grown more than twice as fast as consumption, exports have grown faster than imports, and the north has grown faster than the south. For we are determined that this will be an economic recovery for all, felt in all parts of our nation, and that is already happening.

In which areas of the country are we seeing the strongest jobs growth? Not just in our capital city—the midlands is creating jobs three times faster than London and the south-east. In the past year, we have seen more people in work in the northern powerhouse than ever before. Where do we have the highest employment rate of any part of our country? In the south-west of England. Our long-term economic plan is working.

But the OBR reminds us today of the huge challenges we still face at home and abroad. Our debts are too high; and our deficit remains. Productivity is growing, but we still lag behind most of our competitors. I can tell the House that, in today’s forecast, the expectations for world growth and world trade have been revised down again. The weakness of the eurozone remains a persistent problem, and there are rising concerns about debt in emerging economies. These are yet more reasons why we are determined to take the necessary steps to protect our economic security.

That brings me to the forecasts for our own GDP. Even with the weaker global picture, our economy this year is predicted to grow by 2.4%. Growth is then revised up from the Budget forecast in the next two years to 2.4% in 2016 and 2.5% in 2017. It then starts to return to its long-term trend, with growth of 2.4% in 2018 and 2.3% in 2019 and 2020. That growth is more balanced than in the past. Whole economy investment is set to grow faster in Britain than in any other major advanced economy in the world this year, next year, and the year after that.

When I presented my first spending review in 2010 and set this country on the path of living within its means, our opponents claimed that growth would be choked off, a million jobs would be lost and inequality would rise. Every single one of those predictions has proved to be completely wrong. So, too, did the claim that Britain had to choose between sound public finances and great public services. It is a false choice; if we are bold with our reforms we can have both. That is why, while we have been reducing Government spending, crime has fallen, a million more children are being educated in good and outstanding schools, and public satisfaction with our local government services has risen. That is the exact opposite of what our critics predicted. Yet now, the same people are making similar claims about this spending review, as we seek to move Britain out of deficit and into surplus, and they are completely wrong again.

The OBR has seen our public expenditure plans and analysed their effect on our economy. Its forecast today is that the economy will grow robustly every year, living standards will rise every year, and more than a million extra jobs will be created over the next five years. That is because sound public finances are not the enemy of sustained growth; they are its precondition. Our economic plan puts the security of working people first, so that we are prepared for the inevitable storms that lie ahead. That is why our charter for budget responsibility commits us to reducing the debt to GDP ratio in each and every year of this Parliament, reaching a surplus in the year 2019-20 and keeping that surplus in normal times. I can confirm that the OBR has today certified that the economic plan we present delivers on our commitment.

That brings me to the forecasts for debt and deficit. As usual, the OBR has had access to both published and unpublished data, and has made its own assessment of our public finances. Since the summer Budget, housing associations in England have been reclassified by our independent Office for National Statistics and their borrowing and debts been brought on to the public balance sheet, and that change will be backdated to 2008. This is a statistical change and therefore the OBR has re-calculated its previous Budget forecast to include housing associations, so that we can compare like with like. On that new measure, debt was forecast in July to be 83.6% of national income this year. Now, today, in this autumn statement, the OBR forecasts debt this year to be lower at 82.5%. It then falls every year, down to 81.7%—

[Clive Lewis (Norwich South) (Lab)]

Wow, it’s magic.

[Mr Speaker]

Order. Mr Lewis, get a grip of yourself, man. Calm. Take up yoga—you will find it beneficial, man. Now look, the record shows that the Chancellor stays for a very considerable period after his statement to respond to questions, and Members will always find the Chair a friend if they wish to question a Minister—[Interruption.] Yes, they will. Those who have questions to ask will be heard. Meanwhile, the Chancellor will be heard.

[Mr Osborne]

Mr Speaker, I am looking forward to it.

On that new measure, debt was forecast in July to be 83.6% of national income this year. Now, today, in this autumn statement, the OBR forecasts debt this year to be lower at 82.5%. It then falls every year, down to 81.7% next year, down to 79.9% in 2017-18, then down again to 77.3%, then 74.3%, reaching 71.3% in 2020-21. In every single year, the national debt as a share of national income is lower than when I presented the Budget four months ago.

This improvement in the nation’s finances is due to two things. First, the OBR expects tax receipts to be stronger—a sign that our economy is healthier than thought. Secondly, debt interest payments are expected to be lower, reflecting the further fall in the rates we pay to our creditors. Combine the effects of better tax receipts and lower debt interest, and overall the OBR calculates that it means a £27 billion improvement in our public finances over the forecast period, compared with where we were at the Budget.

This improvement in the nation’s finances allows me to do the following. First, we will borrow £8 billion less than we forecast, making faster progress towards eliminating the deficit and paying down our debt—fixing the roof when the sun is shining. Secondly, we will spend £12 billion more on capital investments, making faster progress to building the infrastructure our country needs. Thirdly, the improved public finances allow us to reach the same goal of a surplus while cutting less in the early years. We can smooth the path to the same destination.

That means that we can help on tax credits. I have been asked to help in the transition as Britain moves to the higher-wage, lower-welfare, lower-tax society the country wants to see. I have had representations that the changes to tax credits should be phased in. I have listened to the concerns. I hear and understand them. Because I have 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.

What that means is that the tax credit taper rate and thresholds remain unchanged. The disregard will be £2,500. I propose no further changes to the universal credit taper or to the work allowances beyond those that passed through Parliament last week. The minimum income floor in universal credit will rise with the national living wage.

I set a lower welfare cap at the Budget. The House should know that helping with the transition obviously means that we will not be within that lower welfare cap in the first years, but the House should also know that, thanks to our welfare reforms, we will meet the cap in the later part of this Parliament. Indeed, on the figures published today, we will still achieve the £12 billion per year of welfare savings we promised. That is because of the permanent savings we have already made and further long-term reforms that we announce today.

The rate of housing benefit in the social sector will be capped at the relevant local housing allowance—in other words, the same rate that is paid to those in the private rented sector who receive the same benefit. That will apply to new tenancies only. We will also stop paying housing benefit and pension credit payments to people who have left the country for more than a month. The welfare system should be fair to those who need it and fair to those who pay for it.

Improved public finances and our continued commitment to reform mean that we continue to be on target for a surplus. The House will want to know the level of that surplus, so let me give the OBR forecasts for deficit and borrowing. In 2010, the deficit we inherited was estimated to be 11.1% of national income. This year, it is set to be almost a third of that, 3.9%. Next year, it falls to less than a quarter of what we inherited, 2.5%. The deficit is down again to 1.2% in 2017-18 and down to just 0.2% the year after that, before moving into a surplus of 0.5% of national income in 2019-20, rising to 0.6% the following year.

Let me turn to the cash borrowing figures. With housing associations included, the OBR predicted at the time of the Budget that Britain would borrow £74.1 billion this year. Instead, it now forecasts that we will borrow less than that at £73.5 billion. Borrowing falls to £49.9 billion next year and then continues to fall. It falls to lower than was forecast at the Budget in every single year after that: to £24.8 billion in 2017-18 and down to just £4.6 billion in 2018-19. In 2019-20, we will reach a surplus—a surplus of £10.1 billion.

That is higher than was forecast at the Budget—Britain out of the red and into the black. In 2020-21, the year after that, the surplus rises to £14.7 billion.

So the deficit falls every year; the debt share is lower in every year than previously forecast; we are borrowing £8 billion less than we expected overall; and we reach a bigger surplus. We have achieved this while at the same time helping working families as we move to the lower-welfare, higher-wage economy, and we have the economic security of knowing our country is paying its way in the world.

That brings me to our plans for public expenditure and taxation. I want to thank my right hon. Friend the Chief Secretary, our other ministerial colleagues at the Treasury and the brilliant officials who have assisted us for the long hours and hard work that they have put into developing these plans.

We said £5 billion would come from the measures on tax avoidance, evasion and imbalances. Those measures were announced at the Budget. Together we go further today, with new penalties for the general anti-abuse rule, which this Government introduced, and action on disguised remuneration schemes and stamp duty avoidance, and we will stop abuse of the intangible fixed assets regime and capital allowances. We will also exclude energy generation from the venture capital schemes, to ensure that they remain well targeted at higher-risk companies.

Her Majesty’s Revenue and Customs is making efficiencies of 18% of its own budget. In the digital age, we do not need taxpayers to pay for paper processing or 170 separate tax offices around the country. Instead, we are reinvesting some of those savings, with an extra £800 million in the fight against tax evasion—an investment with a return of almost 10 times in additional tax collected.

We are going to build one of the most digitally advanced tax administrations in the world in this Parliament, so that every individual and every small business will have their own digital tax account by the end of the decade in order to manage their tax online. From 2019, once these accounts are up and running, we will require capital gains tax to be paid within 30 days of completion of any disposal of residential property. Together, these things form part of the digital revolution we are bringing to Whitehall with this spending review. The Government Digital Service will receive an additional £450 million, but the core Cabinet Office budget will be cut by 26%, matching a 24% cut in the budget of the Treasury, and the cost of all Whitehall administration will be cut by £1.9 billion. These form part of the £12 billion of savings to Government Departments that I am announcing today.

In 2010, Government spending took up 45% of national income. This was a figure we could not sustain, because it was neither practical nor sensible to raise taxes high enough to pay for that, and we ended up with a massive structural deficit. Today the state accounts for just under 40% of national income, and it is forecast to reach 36.5% by the end of the spending review period. The structural spending that this represents is at a level that a competitive, modern, developed economy can sustain, and it is a level that the British people are prepared to pay their taxes for.

It is precisely because this Government believe in decent public services and a properly funded welfare state that we are insistent that they are sustainable and affordable. To simply argue all the time that public spending must always go up and never be cut is irresponsible and lets down the people who rely on public services most.

Equally, to fund the things we want the Government to provide in the modern world, we have to be prepared to provide the resources. So I am setting the limits for total managed expenditure as follows. This year, public spending will be £756 billion. Then it will be £773 billion next year, then £787 billion the year after, then £801 billion, before reaching £821 billion in 2019-20, the year we are forecast to eliminate the deficit and achieve the surplus. After that, the forecast public spending rises broadly in line with the growth of the economy and will be at £857 billion in 2020-21.

The figures from the OBR show that over the next five years, welfare spending falls as a percentage of national income while departmental capital investment is maintained and is higher at the end of the period. That is precisely the right switch for a country that is serious about investing in its long-term economic success.

People will want to know what the levels of public spending mean in practice and the scale of the cuts we are asking Government Departments to undertake. Over this spending review period, the day-to-day spending of Government Departments is set to fall by an average of 0.8% a year in real terms. That compares with an average fall of 2% over the last five years, so the savings we need are considerably smaller. This reflects the improvement in the public finances and the progress we have already made. Indeed, the overall rate of annual cuts that I set out in today’s spending review is less than half of those delivered over the last five years. So Britain is spending a lower proportion of its money on welfare and a higher proportion on infrastructure; seeing the budget balanced, with cuts half what they were in the last Parliament; making the savings we need, no less and no more; and providing economic security to the working people of a country with a surplus that lives within its means.

This does not, of course, mean that the decisions required to deliver these savings are easy. But nor should we lose sight of the fact that this spending review commits £4 trillion over the next five years. It is a huge commitment of the hard-earned cash of British taxpayers, and all those who dedicate their lives to public service will want to make sure it is well spent. Our approach is not simply retrenchment, it is to reform and rebuild.

These reforms will support our objectives for our country: first, to develop a modern, integrated health and social care system that supports people at every stage of their lives. Secondly, to spread economic power and wealth through a devolution revolution and invest in our long-term infrastructure. Thirdly, to extend opportunity by tackling the big social failures that for too long have held people back in our country. Fourthly, to reinforce our national security with the resources to protect us at home and project our values abroad. The resources allocated by this spending review are driven by these four goals.

The first priority of this Government is the first priority of the British people—our national health service. Health spending was cut by the Labour Administration in Wales, but we Conservatives have been increasing spending on the NHS in England, and in this spending review we do so again. We will work with our health professionals to deliver the very best value for that money. That means £22 billion of efficiency savings across the service; it means a 25% cut in the Whitehall budget of the Department of Health; and it means modernising the way we fund students of healthcare. Today there is a cap on student nurses—over half of all applicants are turned away, and it leaves hospitals relying on agencies and overseas staff. So we will replace direct funding with loans for new students, so that we can abolish this self-defeating cap and create up to 10,000 new training places in this Parliament.

Alongside these reforms, we will give the NHS the money it needs. We made a commitment to a £10 billion real increase in the health service budget, and we fully deliver that today, with the first £6 billion delivered up front next year. This fully funds the five-year forward view that the NHS itself put forward as the plan for its future. As the chief executive of NHS England, Simon Stevens, said,

“the NHS has been heard and actively supported.”

Let me explain what that means in cash. The NHS budget will rise from £101 billion today to £120 billion by 2020-21. This is a half a trillion pound commitment to the NHS over this Parliament—the largest investment in the health service since its creation.

So we have a clear plan for improving the NHS. We have fully funded it, and in return patients will see more than £5 billion of health research in everything from genomes to antimicrobial resistance, a new dementia institute and a new, world-class public health facility in Harlow. And more—800,000 more elective hospital admissions; 5 million more out-patient appointments; 2 million more diagnostic tests; new hospitals funded in Cambridge, in Sandwell and in Brighton; cancer testing within four weeks; and a brilliant NHS available seven days a week.

There is one part of our NHS that has been neglected for too long, and that is mental health. I want to thank the all-party group led by my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell), the right hon. Member for North Norfolk (Norman Lamb) and Alastair Campbell for its work in this vital area. In the last Parliament we made a start by laying the foundations for equality of treatment, with the first ever waiting time standards for mental health. Today, we build on that with £600 million of additional funding, meaning that by 2020 significantly more people will have access to talking therapies, perinatal mental health services and crisis care—all possible because we made a promise to the British people to give our NHS the funding it needed, and in this spending review we have delivered.

The health service cannot function effectively without good social care. The truth we need to confront is that many local authorities will not be able to meet growing social care needs unless they have new sources of funding. That, in the end, comes from the taxpayer, so in future those local authorities that are responsible for social care will be able to levy a new social care precept of up to 2% on council tax.

The money raised will have to be spent exclusively on adult social care, and if all authorities make full use of it, it will bring almost £2 billion more into the care system. It is part of the major reform we are undertaking to integrate health and social care by the end of the decade. To help to achieve that I am today increasing the better care fund to support that integration, with local authorities able to access an extra £1.5 billion by 2019-20. The steps taken in this spending review mean that by the end of the Parliament, social care spending will have risen in real terms.

A civilised and prosperous society such as ours should support its most vulnerable and elderly citizens. That includes a decent income in retirement. More than 5 million people have already been auto-enrolled into a pension thanks to our reforms in the last Parliament. To help businesses with the administration of that important boost to our nation’s savings, we will align the next two phases of contribution rate increases with the tax years. The best way to afford generous pensioner benefits is to raise the pension age in line with life expectancy, as we are already set to do in this Parliament. That allows us to maintain a triple lock on the value of the state pension, so never again will Britain’s pensioners receive a derisory increase of 75p.

As a result of our commitment to those who have worked hard all their lives and contributed to our society, I can confirm that next year the basic state pension will rise by £3.35 to £119.30 a week. That is the biggest real-terms increase to the basic state pension in 15 years. Taking all our increases together over the past five years, pensioners will be £1,125 better off a year than they were when we came to office. We are also undertaking the biggest change in the state pension for 40 years to make it simpler and fairer by introducing the new single-tier pension for new pensioners from April of next year.

I am today setting the full rate for our new state pension at £155.65. That is higher than the current means-tested benefit for the lowest income pensioners in our society and another example of progressive government in action. Instead of cutting the savings credit, as in previous fiscal events, it will instead be frozen at its current level where income is unchanged.

So the first objective of this spending review is to give unprecedented support to health, social care and our pensioners. The second is to spread economic power and wealth across our nation. In recent weeks, great metropolitan areas such as Sheffield, Liverpool, the Tees Valley, the north east and the west midlands have joined Greater Manchester in agreeing to create elected mayors in return for far-reaching new powers over transport, skills and the local economy. It is the most determined effort to change the geographical imbalance that has bedevilled the British economy for half a century.

We are also today setting aside the £12 billion we promised for our local growth fund and I am announcing the creation of 26 new or extended enterprise zones, including 15 zones in towns and rural areas from Carlisle to Dorset to Ipswich. But if we really want to shift power in our country, we have to give all local councils the tools to drive the growth of business in their area and the rewards that come when they do so, so I can confirm today that, as we set out last month, we will abolish the uniform business rate. By the end of the Parliament, local government will keep all of the revenue from business rates. We will give councils the power to cut rates and make their area more attractive to business, and elected mayors will be able to raise rates, provided they are used to fund specific infrastructure projects supported by the local business community.

As the amount we raise in business rates is in total much greater than the amount we give to local councils through the local government grant, we will phase that grant out entirely over this Parliament and we will also devolve additional responsibilities. The temporary accommodation management fee will no longer be paid through the benefits system. Instead, councils will receive £10 million a year more, up front, so they can provide more help to homeless people. Alongside savings in the public health grant, we will consult on transferring new powers and the responsibility for its funding, as well as elements of the administration of housing benefit.

Local government is sitting on property worth a quarter of a trillion pounds, so we will let councils spend 100% of the receipts from the assets they sell to improve their local services. Councils increased their reserves by nearly £10 billion over the last Parliament. We will encourage them to draw on those reserves as they undertake reforms.

That amounts to a big package of not only new powers but new responsibilities for local councils. It is a revolution in the way we govern this country and if we take into account both the fall in grant and the rise in council incomes, it means that by the end of the Parliament local government will be spending the same in cash terms as it does today.

The devolved Administrations of the United Kingdom will also have available to them unprecedented new powers to drive their economies. The conclusion last week of the political talks in Northern Ireland means additional spending power for the Executive to support the full implementation of the Stormont House agreement. That opens the door to the devolution of corporation tax, which the parties have now confirmed they wish to set at a rate of 12.5%. That is a huge prize for business in Northern Ireland and the onus is now on the Northern Ireland Executive to play their part and deliver sustainable budgets so that we can move forward. Northern Ireland’s block grant will be more than £11 billion by 2019-20 and funding for capital investment in new infrastructure will rise by more than £600 million over five years, ensuring that Northern Ireland can invest in its long-term future.

For years, Wales has asked for a funding floor to protect public spending and now, within months of coming to office, this Conservative Government are answering that call and providing that historic funding guarantee for Wales. I can announce today that we will introduce the new funding floor and set it for this Parliament at 115%. My right hon. Friend the Secretary of State for Wales and I also confirm that we will legislate so that the devolution of income tax can take place without a referendum. We will also help to fund a new Cardiff city deal. So the Welsh block grant will reach almost £15 billion by 2019-20, while the capital spending will rise by more than £900 million over five years.

As Lord Smith confirmed earlier this month, the Scotland Bill meets the vow made by the parties of the Union when the people of Scotland voted to remain in the United Kingdom. It must be underpinned by a fiscal framework that is fair to all taxpayers and we are ready now to reach an agreement. The ball is in the Scottish Government’s court. Let us have a deal that is fair to Scotland, fair to the UK and built to last. We are implementing the city deal with Glasgow, and negotiating deals for Aberdeen and Inverness too. Of course, if Scotland had voted for independence, it would have had its own spending review this autumn. With world oil prices falling, and revenues from the North sea forecast by the OBR to be down 94%, we would have seen catastrophic cuts to Scottish public services.

Thankfully, Scotland remains a strong part of a stronger United Kingdom, so the Scottish block grant will be more than £30 billion in 2019-20, while the capital spending available will rise by £1.9 billion through to 2021—the UK Government giving Scotland the resources to invest in its long-term future. For the UK Government, the funding of the Scotland, Wales and Northern Ireland Offices will all be protected in real terms.

We are devolving power across our country, and we are also spending on the economic infrastructure that connects our nation. That is something that Britain has not done enough of for a generation. Now, by making the difficult decisions to save on day-to-day costs in departments, we can invest in the new roads, railways, science, flood defences and energy that Britain needs. We made a start in the last Parliament, and in the last week Britain topped the league table of the best places in the world to invest in infrastructure. In this spending review, we go much further. The Department for Transport’s operational budget will fall by 37%, but transport capital spending will increase by 50%, to a total of £61 billion—the biggest increase in a generation. That will fund the largest road investment programme since the 1970s—for we are the builders.

That means that the construction of High Speed 2 to link the northern powerhouse to the south can begin and that the electrification of lines such as the trans-Pennine, the midland main line and the Great Western can go ahead. We will fund our new Transport for the North to get it up and running, London will get an £11 billion investment in its transport infrastructure, and having met my hon. Friend the Member for Folkestone and Hythe (Damian Collins) and other Kent MPs, I will relieve the pressure on roads in Kent from Operation Stack with a new quarter of a billion pound investment in facilities there. We are making the £300 million commitment to cycling that we promised, we will spend more than £5 billion on roads maintenance this Parliament, and thanks to the incessant lobbying of my hon. Friend the Member for Northampton North (Michael Ellis), Britain now has a permanent pothole fund.

We are investing in the transport we need, and in the flood defences too. The day-to-day budget of the Department for Environment, Food and Rural Affairs falls by 15% in this spending review, but we are committing more than £2 billion to protect 300,000 homes from flooding. Our commitment to farming and the countryside is reflected in the protection of funding for our national parks and for our forests—we are not going to make that mistake again. In recognition of the higher costs they face, we will continue to provide £50 off the water bills of South West Water customers for the rest of this Parliament—a Conservative promise made to the south-west, and a promise kept.

Investing in the long-term economic infrastructure of our country is a goal of this spending review, and there is no more important infrastructure than energy. So we are doubling our spending on energy research with a major commitment to small modular nuclear reactors. We are also supporting the creation of the shale gas industry by ensuring that communities benefit from a shale wealth fund that could be worth up to £l billion. Support for low-carbon electricity and renewables will more than double. The development and sale of ultra-low emission vehicles will continue to be supported, but in light of the slower than expected introduction of more rigorous EU emissions testing, we will delay the removal of the diesel supplement from company cars until 2021.

We support the international efforts to tackle climate change, and to show our commitment to the Paris talks next week, as the Prime Minister just explained, we are increasing our support for climate finance by 50% over the next five years. The day-to-day resource budget of the Department of Energy and Climate Change will fall by 22%, we will reform the renewable heat incentive to save £700 million, and we will permanently exempt our energy intensive industries, such as steel and chemicals, from the cost of environmental tariffs, so we keep their bills down, keep them competitive and keep them here.

We are introducing a cheaper domestic energy efficiency scheme that replaces the energy company obligation. Britain’s new energy scheme will save an average of £30 a year from the energy bills of 24 million households, because the Government believe that going green should not cost the earth. And we are cutting other bills too. We will bring forward reforms to the compensation culture around minor motor accident injuries, which will remove over £l billion from the cost of providing motor insurance. We expect the industry to pass on this saving, so that motorists see an average saving of £40 to £50 per year off their insurance bills.

We are a Government who back all our businesses, large and small, and Conservative Members understand that there is no growth or jobs without a vibrant private sector and successful entrepreneurs. So this spending review delivers what business needs. Business needs competitive taxes. I have already announced in the Budget a reduction in our corporation tax rate to 18%. Our overall review of business rates will report at the Budget, but I am today helping 600,000 of our smallest businesses by extending our small business rate relief scheme for another year.

Businesses also need an active and sustained industrial strategy. That strategy, launched in the last Parliament, continues in this one. We commit to the same level of support for our aerospace and automotive industries, not just for the next five years but for the next decade. Spending on our new catapult centres will increase. We will protect the cash support we give through Innovate UK—something we can afford to do by offering £165 million of new loans to companies instead of grants, as France has successfully done for many years. That is one of the savings that helps us reduce the budget of the Department for Business, Innovation and Skills by 17%.

In the modern world, one of the best ways to back business is to back science, and that is why, in the last Parliament, I protected the resource budget for science in cash terms. In this Parliament, I am protecting it in real terms, so that it rises to £4.7 billion. That is £500 million more by the end of the decade, alongside the £6.9 billion capital budget. We are funding the new Royce Institute in Manchester, and new agri-tech centres in Shropshire, York, Bedfordshire and Edinburgh. And we will commit £75 million to a transformation of the famous Cavendish laboratories in Cambridge, where Crick and Rutherford expanded our knowledge of the universe. To make sure we get the most from our investment in science, I have asked another of our Nobel laureates, Paul Nurse, to conduct a review of the research councils. I want to thank him for the excellent report he has just published. We will implement its recommendations.

Britain is not just brilliant at science; it is brilliant at culture too. One of the best investments we can make as a nation is in our extraordinary arts, museums, heritage, media and sport. Now, £1 billion a year in grants adds a quarter of a trillion pounds to our economy—not a bad return. So deep cuts in the small budget of the Department for Communities and Local Government are a false economy. Its core administration budget will fall by 20%, but I am increasing the cash that will go to the Arts Council, our national museums and galleries. We will keep free museum entry and look at a new tax credit to support their exhibitions. I will help UK Sport, which has been living on diminishing reserves, with a 29% increase in its budget, so we go for gold in Rio and Tokyo. The right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), a former Home Secretary,has personally asked me to support his city’s year of culture, and I am happy to do so with a grant. His campaign has contributed to the arts, while his Front-Bench team contributes to comedy.

The money for Hull is all part of a package for the northern powerhouse that includes funding the iconic new Factory Manchester and the Great Exhibition of the North. In Scotland, we will support the world famous Burrell collection, while here in London we will help the British Museum, the Science Museum and the V&A move their collections out of storage and put them on display, and we will fund the exciting plans for a major new home for the Royal College of Arts in Battersea. We are also increasing the funding for the BBC World Service, so that British values of freedom and free expression are heard around the world.

All this can be achieved, as my right hon. Friend the Prime Minister said, without raiding the Big Lottery Fund, as some feared. It will continue to support the work of hundreds of small charities across Britain. So too will our £20 million a year of new support for social impact bonds. There are many great charities that work to support vulnerable women, as was mentioned in Prime Minister questions. My hon. Friend the Member for Colchester (Will Quince) has proposed to me a brilliant way to give them more help. Some 300,000 people have signed a petition arguing that no VAT should be charged on sanitary products. We already charge the lowest rate—5%—allowable under European law and we are committed to getting the EU to change its rules. Until that happens, I will use the £15 million a year raised from the tampon tax to fund women’s health and support charities. The first £5 million will be distributed between the Eve Appeal, SafeLives, Women’s Aid, and The Haven, and I invite bids from other such good causes.

It is similar to the way we use LIBOR fines—and today I make further awards from them, too. We will support a host of military charities, from the organisation for guide dogs for military veterans to Care after Combat. We renovate our military museums, from the Royal Marines and D-Day museums in Portsmouth to the National Army museum, the Hooton Park aerodrome, and the former HQ of RAF Fighter Command at Bentley Priory. In the Budget, I funded one campaign bunker, but more have emerged since then.

At the suggestion of my right hon. Friend the Member for Mid Sussex (Sir Nicholas Soames), we will support the fellowships awarded in the name of his grandfather by funding the Winston Churchill memorial trust. We will fund the brilliant Commonwealth War Graves commission, so it can tend to over 6,000 graves of those who died fighting for our country since the second world war; and we will contribute to a memorial to those victims of terrorism who died on the bus in Tavistock square 10 years ago. That is a reminder that we have always faced threats to our way of life, and have never allowed them to defeat us.

We deliver security so we can spread opportunity. That is the third objective that drives this spending review. We showed in the last five years that sound public finances and bold public service reform can help the most disadvantaged in our society. That is why inequality is down, child poverty is down, the gender pay gap is at a record low and the richest fifth now pay more in taxes than the rest of the country put together. The other side talks of social justice; this side delivers it because we are all in this together.

In the next five years, we will be even bolder in our social reform. It starts with education, because that is the door to opportunity in our society. This spending review commits us to a comprehensive reform of the way it is provided from childcare to college. We start with the largest ever investment in free childcare, so working families get the help they need. From 2017, we will fund 30 hours of free childcare for working families with three and four-year-olds. We will support £10,000 of childcare costs tax free. To make this affordable, this extra support will now be available only to parents working more than 16 hours a week and with incomes of less than £100,000. We will maintain the free childcare we offer to the most disadvantaged two-year-olds. To support nurseries delivering more free places for parents, we will increase the funding for the sector by £300 million. Taken together, that is a £6 billion childcare commitment to the working families of Britain.

Next, schools. We build on our far-reaching reforms of the last Parliament that have seen school standards rise even as exams become more rigorous. We will maintain funding for free infant school meals, protect rates for the pupil premium and increase the cash in the dedicated schools grant. We will maintain the current national base rate of funding for our 16 to 19-year-old students for the whole Parliament. We are going to open 500 new free schools and university technical colleges, and invest £23 billion in school buildings and 600,000 new school places. To help all our children make the transition to adulthood—and learn about not just their rights, but their responsibilities—we will expand the National Citizen Service. Today, 80,000 students go on National Citizen Service. By the end of the decade we will fund places for 300,000 students on this life-changing programme pioneered by my right hon. Friend the Prime Minister.

Five years ago, 200 schools were academies: today, 5,000 schools are. Our goal is to complete this school revolution and help every secondary school become an academy. I can announce that we will let sixth-form colleges become academies, too, so that they no longer have to pay VAT. We will make local authorities running schools a thing of the past, which will help us save around £600 million on the education services grant.

I can tell the House that as a result of this spending review, not only is the schools budget protected in real terms but the total financial support for education, including childcare and our extended further and higher education loans, will increase by £10 billion. That is a real-terms increase for education, too.

There is something else I can tell the House. We will phase out the arbitrary and unfair school funding system that has systematically underfunded schools in whole swathes of the country. Under the current arrangements, a child from a disadvantaged background in one school can receive half as much funding as a child in identical circumstances in another school. In its place, we will introduce a new national funding formula. I commend the many MPs from all parties who have campaigned for many years to see this day come. The formula will start to be introduced from 2017, and my right hon. Friend the Education Secretary will consult in the new year.

Education continues in our further education colleges and universities—and so do our reforms. We will not, as many predicted, cut core adult skills funding for FE colleges; we will instead protect it in cash terms. I announced in the Budget that we would replace unaffordable student maintenance grants with larger student loans. That saves us over £2 billion a year in this spending review, and it means we can extend support to students who have never before had Government help.

Today I can announce that part-time students will be able to receive maintenance loans, helping some of our poorer students. We will also, for the first time, provide tuition fee loans for those studying higher skills in FE, and extend loans to all postgraduates, too. Almost 250,000 extra students will benefit from all this new support that I am announcing today.

Then there is our apprenticeship programme—the flagship of our commitment to skills. In the last Parliament, we more than doubled the number of apprentices to 2 million. By 2020, we want to see 3 million apprentices. To make sure they are high-quality apprenticeships, we will increase the funding per place, and my right hon. Friend the Business Secretary will create a new business-led body to set the standards. As a result, we will be spending twice as much on apprenticeships by 2020 compared with when we came to office.

To ensure that large businesses share the cost of training the workforce, I announced at the Budget that we will introduce a new apprenticeship levy from April 2017. Today I am setting the rate at 0.5% of an employer’s pay bill. Every employer will receive a £15,000 allowance to offset against the levy, which means over 98% of all employers and all businesses with pay bills of less than £3 million will pay no levy at all. Britain’s apprenticeship levy will raise £3 billion a year and will fund 3 million apprenticeships, with those paying it able to get out more than they put in. It is a huge reform to raise the skills of the nation and address one of the enduring weaknesses of the British economy.

Education and skills are the foundation of opportunity in our country. Next we need to help people into work. The number claiming unemployment benefits has fallen to just 2.3%—the lowest rate since 1975. But we are not satisfied that the job is done; we want to see full employment. So today we confirm we will extend the same support and conditionality we currently expect of those on jobseeker’s allowance to over 1 million more benefit claimants. Those signing on will have to attend the jobcentre every week for the first three months. We will increase in real terms the help we provide to people with disabilities to get them into work. This can all be delivered within the 14% savings we make to the resource budget of the Department for Work and Pensions, including by reducing the size of its estate and co-locating jobcentres with local authority buildings. It is the way to save money while improving the front-line service we offer people and providing more support for those who are most vulnerable and most in need of our help.

We cannot say we are fearlessly tackling the most difficult social problems if we turn a blind eye to what goes on in our prisons and criminal justice system. My right hon. Friend the Lord Chancellor has worked with the Lord Chief Justice and others to put forward a typically bold and radical plan to transform our courts so they are fit for the modern age. Under-used courts will be closed, and I can announce today that the money saved will be used to fund a £700 million investment in new technology that will bring further and permanent long-term savings and speed up the process of justice.

Old Victorian prisons in our cities that are not suitable for rehabilitating prisoners will be sold. This will also bring long-term savings and means we can spend over £1 billion in this Parliament building nine new modern prisons. Today, the transformation gets under way with the announcement that the Justice Secretary has just made. I can tell the House that Holloway prison—the biggest women’s jail in western Europe—will close. In the future, women prisoners will serve their sentences in more humane conditions, better designed to keep them away from crime.

By selling these old prisons, we will create more space for housing in our inner cities, for another of the great social failures of our age has been the failure to build enough houses. In the end, spending reviews like this come down to choices about what your priorities are. I am clear: in this spending review, we choose to build. Above all, we choose to build the homes that people can buy, for there is a growing crisis of home ownership in our country. Fifteen years ago, around 60% of people under 35 owned their own home. Next year, the figure is said to be just half that. We made a start on tackling this in the last Parliament, and, with schemes such as our Help to Buy, the number of first-time buyers rose by nearly 60%, but we have not done nearly enough yet, so it is time to do much more.

Today we set out our bold plan to back families who aspire to buy their own home. First, I am doubling the housing budget to £2 billion a year. We will deliver, with Government help, 400,000 affordable new homes by the end of the decade. Affordable means not just affordable to rent, but affordable to buy. That is the biggest house building programme by any Government since the 1970s. Almost half of them will be our starter homes, sold at 20% off market value to young first-time buyers, and 135,000 will be our brand new Help to Buy: Shared Ownership, which we announce today. We will remove many of the restrictions on shared ownership—who can buy them, who can build them and who they can be sold on to.

The second part of our housing plan delivers on our manifesto commitment to extend the right to buy to housing association tenants. I can tell the House that this starts with a new pilot. From midnight tonight, tenants of five housing associations will be able to start the process of buying their own home.

The third element of the plan involves accelerating housing supply. We are announcing further reforms to our planning system so that it delivers more homes more quickly. We are releasing public land suitable for 160,000 homes and re-designating unused commercial land for starter homes. We will extend loans for small builders, regenerate more run-down estates and invest over £300 million in delivering at Ebbsfleet the first garden city in nearly a century.

Fourthly, the Government will help address the housing crisis in our capital city with a new scheme—London Help to Buy. Londoners with a 5% deposit will be able to get an interest-free loan worth up to 40% of the value of a newly built home. My hon. Friend the Member for Richmond Park (Zac Goldsmith) has been campaigning on affordable home ownership in London. Today we back him all the way.

The fifth part of our housing plan addresses the fact that more and more homes are being bought as buy-to-lets or second homes. Many of them are cash purchases that are not affected by the restrictions I introduced in the Budget on mortgage interest relief, and many of them are bought by those who are not resident in this country. Frankly, people buying a home to let should not squeeze out families who cannot afford a home to buy. So I am introducing new rates of stamp duty that will be 3% higher on the purchase of additional properties, such as buy-to-lets and second homes. It will be introduced from April next year and we will consult on the details so that corporate property development is not affected. This extra stamp duty raises almost £1 billion by 2021, and we will reinvest some of that money in local communities in London and places like Cornwall, which are being priced out of home ownership. The funds we raise will help build the new homes.

This spending review delivers: a doubling of the housing budget; 400,000 new homes, with extra support for London; estates regenerated; and right to buy rolled-out, paid for by a tax on buy-to-lets and second homes, and delivered by a Conservative Government committed to helping working people who want to buy their own home. For we are the builders.

The fourth and final objective of this spending review is national security. On Monday, the Prime Minister set out to the House the strategic defence and security review. It commits Britain to spending 2% of our income on defence, and it details how these resources will be used to provide new equipment for our war-fighting military, new capabilities for our special forces, new defences for our cyberspace, and new investments in our remarkable intelligence agencies.

By 2020-21, the single intelligence account will rise from £2.1 billion to reach £2.8 billion, and the defence budget will rise from £34 billion today to £40 billion. Britain also commits to spend 0.7% of our national income on overseas development, and we will reorientate that budget so that we both meet our moral obligation to the world’s poorest and help those in the fragile and failing states on Europe’s borders. It is overwhelmingly in our national interest that we do so, so our total overseas aid budget will increase to £16.3 billion by 2020.

Britain is unique in the world in making these twin commitments to funding both the hard power of military might and the soft power of international development. It enables us to protect ourselves, project our influence and promote our prosperity. We do so ably supported by my right hon. Friend the Foreign Secretary and our outstanding diplomatic service. To support them in their vital work, I am today protecting in real terms the budget of the Foreign and Commonwealth Office.

But security starts at home. Our police are on the frontline of the fight to keep us safe. In the last Parliament, we made savings in police budgets, but thanks to the reforms of my right hon. Friend the Home Secretary and the hard work of police officers, crime fell and the number of neighbourhood officers increased. That reform must continue in this Parliament. We need to invest in new state-of-the-art mobile communications for our emergency services, introduce new technology at our borders and increase the counter-terrorism budget by 30%. We should allow elected police and crime commissioners greater flexibility in raising local precepts in areas where they have been historically low. Further savings can be made in the police as different forces merge their back offices and share expertise. We will provide a new fund to help with this reform.

I have had representations from the shadow Home Secretary that police budgets should be cut by 10%, but now is not the time for further police cuts. Now is the time to back our police and give them the tools to do the job. I am today announcing that there will be no cuts in the police budget at all. There will be real-terms protection for police funding. The police protect us, and we are going to protect the police.

Five years ago, when I presented my first spending review, the country was on the brink of bankruptcy and our economy was in crisis. We took the difficult decisions then. Five years later, I report on an economy growing faster than its competitors and public finances set to reach a surplus of £10 billion. Today we have set out the further decisions necessary to build this country’s future. Those decisions are sometimes difficult, yes, but they build the great public services families rely on; build the infrastructure and the homes people need; build stronger defences against those who threaten our way of life; and build the strong public finances on which all these things depend.

We were elected as a one nation Government. Today we deliver the spending review of a one nation Government. The guardians of economic security, the protectors of national security, the builders of our better future—this Government, the mainstream representatives of the working people of Britain.

--- Later in debate ---

[John McDonnell]

I thought this would help the Chancellor. Mao is rarely quoted in this Chamber. The quote is this—[Interruption.] Behave.

“We must learn to do economic work from all who know how, no matter who they are. We must esteem them as teachers, learning from them respectfully and conscientiously. We must not pretend to know when we do not know.”

I thought it would come in handy for the Chancellor in his new relationship.

I am sure that Tory Back Benchers will be under instruction to shoehorn into their speeches at every opportunity references to the mythical long-term economic plan. What we have been presented with today is not an economic plan but a political fix. It is not a plan when you ridiculously commit yourself to unachievable policies and leave yourself no room for manoeuvre. It is not a plan when you sell off every long-term asset you have for short-term gain. It is not a plan when you leave important industries to go to the wall—as we have seen with steel—and it is not a plan when you cut the support for those in work, leaving working families to rely on food banks. It is not a plan when you force councils up and down the land to close the very services that people depend upon, and it is not a plan when you invest so little in skills and infrastructure that our future is put at risk.

Instead what we have seen today is the launch of a manifesto for the Conservative leadership election. Our long-term economic security is being sacrificed for the benefit of one man’s career. I want to tell both the Home Secretary and the hon. Member for Uxbridge and South Ruislip (Boris Johnson), my neighbour, who has now left the Chamber, not to worry. The economic reality that is emerging in our economy will mean that this will be seen as the apex of the Chancellor’s career.

The hon. Member for Uxbridge and South Ruislip exudes classical references in his speeches. He will recognise in the Chancellor Icarus the boy who flew too close to the sun and burned and crashed. I fear that for the Chancellor it is all downhill from here. Labour Members will do all we can to ensure that he does not take this economy and our country down with him.

In the end this debate is about what sort of society we want to live in. The Government are systematically dismantling all those aspects of our society that make our community worth living in and celebrating. The Chancellor is not just cutting our services today—he is selling off our future.

But there is an alternative. Our alternative is that we will eliminate the deficit but we will do it fairly and effectively. We will do it by ensuring that we end the tax cuts to the rich, that we tackle tax evasion and avoidance, and that we invest to grow. We will grow our economy on the basis of investment in skills and infrastructure. In addition to becoming the financial centre of Europe, under a Labour Government research in science and technology will enable us to become the technology centre of Europe. That means high skills, high investment and high wages. That is what Labour Members are committed to, and that is what we will secure when we return to office.

[Mr Osborne]

So the shadow Chancellor literally stood at the Dispatch Box and read out from Mao’s little red book. And look—it’s his own personal signed copy. The problem is that half the shadow Cabinet have been sent off for re-education. People treat this Labour leadership as a joke, but they are actually a deadly threat to the economic and national security of this country.

The hon. Gentleman comes here to complain that the deficit and the debt are too high, yet he wants to increase the deficit and the debt and to borrow forever. The problem is that he would borrow in the good times, because he says the country can afford it, and borrow in the bad times because the country could not afford not to. He would always be borrowing money. And how would he be able to afford it? He could afford it because, as he says, his policy

“can readily be funded...through printing money”.

He has said that he would end the Bank of England’s control over interest rates, and he calls it the “people’s quantitative easing”. That is called deficit financing, and it has only been tried in Weimar Germany and Zimbabwe. It would lead to the economic ruin of this country. The Labour leadership’s chief adviser on the economy has said that it would cause a sterling crisis, but that the

“sterling crisis would pass very quickly”.

The shadow Chancellor talks about our support for business and defence industries, but he is a threat to the free market of this country. He wants literally to take control of the commanding heights of the economy. His manifesto is all about nationalising industries. He wants to nationalise the whole banking system of this country—as if the last Labour Government did not do a good enough job by nationalising half of it.

The hon. Gentleman gave a speech at the weekend in which he described his policies as “socialism with an iPad”. The problem is that if the socialists built an iPad, it would weigh a ton, it would be impossible to use and no one would design any programmes for it. It would literally be app-less. And then he has the temerity to get up and talk about defence industry jobs and the police. He has spent his entire career attacking the police forces of this country and calling for them to be disarmed. He has sent me a letter saying that I should fund the Security Service, but it turns out that he has been campaigning to disband MI5. He says he is on the side of the British Army, but he has been sharing platforms with the Irish Republican Army. That is the truth.

Let me end by asking this question. Where is the shadow Chancellor going this evening? He is travelling to Waltham Forest to support the new hard-left members of the constituency Labour party there who are trying to deselect the hon. Member for Walthamstow (Stella Creasy). He is addressing a rally called “Keep up the momentum”—[Interruption.] Well, if he was actually in charge of this country, we know where the momentum would be. It would be in one direction: growth down, jobs down, the security of the country destroyed. In the last three months, he and his friends have taken control of one of the great institutions of our political democracy, the Labour party, and they have brought it to its knees. That is their business, frankly, but Conservative Members are going to make sure that they never get their hands on any of the other institutions of this country, so that we can keep our country safe.

[Mr Kenneth Clarke (Rushcliffe) (Con)]

I congratulate my right hon. Friend on sticking unswervingly, despite all the recent difficulties, to his commitment to a balanced budget over the cycle and on answering the fears expressed by some of us by sticking to his aim of a modest budget surplus if the economic cycle remains strong. Will he reinforce the argument that that is an essential precondition for our building a modern, sustainable economy in this country that is able to withstand such shocks as the global economy will send us in the next few years? When the cheers die down—as they will—and as people fall upon the details, assisted by lobbies, will he tell the responsible majority that ought to exist in this House and in the House of Lords that no Chancellor acting in the national interest could possibly produce a Budget that had no reductions in public spending and no increases in revenue? We do not want a repeat of the utterly irresponsible reversal of the £4 billion a year savings that were made in his earlier Budget.

[Mr Osborne]

I thank my right hon. and learned Friend; he is absolutely right. We do not know what economic storms lie ahead, but we sure as hell know that we have not abolished boom and bust in this country, so we have to prepare for whatever the world throws at us. If a country is not running a budget surplus after nine or 10 years of economic growth, when is it ever going to do so? We are taking sensible steps to build up that surplus and pay down our debts, which have in my view reached dangerously high levels because of the very large deficit we ran over recent years. So those are the steps we are taking. He is also completely right about the lobby groups. In the end, the best way to have great public services is to have sustainable finances. We know to our cost what happens when those public finances are not sustainable: the people who suffer in our country are the most vulnerable and those who are least advantaged. That is why we have taken these steps today to protect them.

[Frank Field (Birkenhead) (Lab)]

When the Chancellor came to the part of his statement about tax credits, I assumed that it was good news, as it was quickly overwhelmed by cheers from those on his own side. For that good news, I thank him. I heard him preface those remarks by saying that he was still in listening mode. Does he accept that when tax credits were devised and shaped, our economy was not moving towards a national living wage? Might I ask him to continue in listening mode, so that by 2020 we can have a tax credit system that reflects the new world of higher wages?

[Mr Osborne]

I want to thank the right hon. Gentleman, who has made sensible and constructive interventions in this debate over recent weeks. The members of his Select Committee also took their task very seriously. Over this Parliament, tax credits are largely being phased out as we move to the new simpler—and better, in my view—universal credit. People will be protected during the transition to universal credit. As he says, we are at the same time reducing the proportion of people’s income that will come from welfare payments because more of it will come from the wages paid by their employers. I do not think we should be supporting and subsidising low pay through the tax credit system in the way we have in the past. In the phasing out of tax credits, the introduction of universal credit and the reforms announced in the summer Budget, including limiting support to families with up to two children, we are creating a fairer welfare system that is fair to the taxpayer.

[Mr Andrew Tyrie (Chichester) (Con)]

A key judgment that the Chancellor has had to make is how much to cut the deficit. With the euro crisis unresolved, the Chinese economy more fragile, the middle east unstable and the US likely to raise rates shortly, does he agree that, given all those risks, it would be not only imprudent but extremely dangerous not to reduce the deficit now, while we have the opportunity to do so? We can never rely on forecasts. Will he confirm that the OBR’s sensitivity analysis towards the back of its report, which I have had a chance to look at only briefly, demonstrates clearly that any future downturn in the public finances would require further retrenchment and that it is therefore absolutely essential we take every opportunity to tighten the finances now, while we have the chance?

[Mr Osborne]

My right hon. Friend is absolutely right. As an economy, we have been growing faster than most of the advanced economies of the world. In that situation, not getting the deficit and the debt falling is really signalling to the world that we are never, ever going to try to bring public finances under control. As it is, we have debt falling in every year of this forecast, and it is lower than the forecast in the Budget. The deficit is also falling and overall borrowing is lower in this forecast than in the one I produced in the summer Budget. We take these steps to pay down our debts. Our national debt, at 80% of national income, is uncomfortably high. It does not necessarily, therefore, give us all the flexibility we would want if we were to be hit by some kind of external shock and is all the more reason for us to use the better times to pay down the debt.

[Stewart Hosie (Dundee East) (SNP)]

I was intrigued by Tory Back Benchers cheering the humiliating U-turn on tax credits. It seems barely three or four weeks ago that they were cheering on, and voting for, the implementation of the tax credit policy. But times move on and things change.

The genesis of today’s statement was the decision announced last year when the Chancellor stated that he wanted to reduce public spending to barely 35% of GDP by the end of this Parliament. That was adjusted up to just over 36% in the summer Budget, but the direction of travel—the shrinking of services provided by the state—was very clear. It was set in stone with the fiscal charter earlier this year, with the intention to run a current account surplus of £40 billion a year by 2019-20. Those numbers have changed slightly today. The Chancellor wants not only to shrink the size of the state to 36.5% of GDP but to run a current account surplus of £42 billion. Can we just be clear? The UK has not routinely seen spending at 36% or 37% of GDP since the 1930s and 1940s. The Chancellor’s ideology has not changed. In essence, he still intends to cut £40 billion a year more than he needs to, to run a current account budget in balance by the end of this Parliament.

Notwithstanding the humiliating U-turn on tax credits, the Government added £37 billion of cuts in tax rises in the summer Budget to the £121 billion of fiscal or discretionary consolidation in the previous Parliament. Announced in the Blue Book today is £18 billion of cuts and the Chancellor was very clear that the £12 billion of welfare cuts remain on the table. Even after today, the public are facing a decade of austerity. These decisions are political choices. The Government ignore the fiscally responsible alternative course of action, which, with a very modest increase in public expenditure, would ensure that no one is left behind.

The Government are not for working people. Nothing they say can camouflage the failure of the past five years, and the Chancellor’s statement merely confirms that they are making the same mistakes all over again. We saw the impact on GDP growth of rising inequality in the 20 years to 2010. The continuation of the austerity agenda represents a wilful disregard for and failure to learn the lessons of the recent past.

The Chancellor may not care about inequality, and the 1 million people receiving food parcels compared with barely 25,000 five or six years ago, but the Government should care about its impact on economic growth. Let me ask the Chancellor some specific questions. We have been concerned for some time about the failure to increase productivity. The Chancellor knows that the UK sits in the third quartile of advanced economies. How does a 17% cut to the Department for Business, Innovation and Skills help to support firms seeking to increase productivity?

We have been concerned about the negative impact of balance of trade, a situation that got worse between the spring and summer Budget forecasts. The impact for every year published today is still negative. How does the absence of a plan to encourage exports and a further cut to the UK Trade & Investment budget help to reverse the dire balance of trade position? We share the Chancellor’s concern to protect growth and tax yield, and to close the tax gap, but how does the closure of 137 HMRC offices possibly do anything other than weaken the ability of the Revenue to collect the tax that is due?

The Chancellor said that the UK would take the fight to its enemies, but he omitted to mention action in Syria. Should the Government get the vote they want in the next few weeks, will he tell us how much he plans to set aside for the reconstruction and stabilisation of Syria after any military intervention is over? We remain as concerned as he does about the failure to invest in capital, which is absolutely imperative to boost economic growth. We welcome the increase in capital spend announced today. I just say to him, however, that cuts last winter, increases in the spring, cuts in the summer and increases in the autumn represent a shambles of a way to plan long-term capital investment.

In Scotland, we saw cuts to revenue and capital over the previous Parliament. We have had confirmation today of further real-terms cuts to Scottish revenue funding over the spending review period. Instead of the Bullingdon sneering about oil, which the Chancellor did earlier, he would have been better recognising that the Scottish economy is now 2.5% larger than it was pre-crisis and productivity is 4% higher than in 2007. It is contributing to the UK recovery. Instead of hobbling and undermining the Scottish Government, he might consider it to be worthy of support.

The Government received barely a third of the vote of those who voted and the Conservative party achieved its worst result in Scotland since 1865. Let us be clear. I do not expect the Chancellor to change his mind, but the public in Scotland and in the UK did not vote for a decade of austerity.

[Mr Osborne]

This spending review delivers economic and national security for the people of Scotland. It funds a £1.9 billion increase to their capital budget and the block grant goes up by £1 billion. There is a 14% capital boost from the United Kingdom Government. Instead of complaining, the hon. Gentleman might, on behalf of the Scottish Government, have welcomed that and set out any plans he might have for how to spend it. I suspect we will hear a lot from the Scottish nationalists in this Parliament about process, constitutional issues and all that, but they will not tell us what they are actually going to do to improve the lives of people in Scotland. He talks about productivity. If we look at the Scottish Government’s record, we see that they have cut 140,000 further education college places in Scotland. They have used the money they have taken from the university sector for free prescriptions for millionaires, as if that is a good use of Scottish taxpayers’ money. Health spending in Scotland is rising more slowly than it is in England, where the Conservative Government are in charge of the English national health service.

In the spending review, there is extra capital for Scotland so it can invest in its long-term future. There is a huge commitment to the defence estate in Scotland, with new planes based at RAF Lossiemouth and a massive investment in shipbuilding on the Clyde for many years to come. By the way, I know that the SNP is keen to court the unions in Scotland. The GMB said that the news about the frigates

“should be welcomed and not used for political mischief”.

That is another sensible thing the GMB has said. And there is the huge investment at the base at Faslane, where 8,000 people work. The Scottish National party pretends it would get rid of the nuclear deterrent and somehow give all those 8,000 people jobs in our defence establishment—the SNP is not being straight with the people who work on the Clyde or in Scotland’s defence industries.

We are also working on implementing the Glasgow city deal, and on a city deal for Inverness and for Aberdeen, and we are ready to sit down with John Swinney to negotiate a fiscal framework. We have now the Scotland Bill, which Lord Smith says “delivers the legislation required” to deliver the agreement. For months, SNP Members have been telling us that we were not doing what the Smith commission said, but now Lord Smith says that we are. To make these powers work, we need agreement on a fiscal framework. Let us sit down—we can sit down tomorrow, next week or whenever—to agree a fair fiscal funding framework.

The truth is that SNP Members complain about decisions on public expenditure, but if Scotland had voted to be independent, its public finances would be in complete tatters. The OBR forecast today is that oil revenues are down 94% in the North sea because of the fall in the world oil price. That is a £20 billion hole in the financial programme that the SNP Government tried to foist on the people of Scotland. The whole thing can be summed up by the words of Mr Alex Bell, who was the former First Minister’s head of policy. He said this week:

“The SNP’s model of independence is broken beyond repair…the campaign towards the 2014 vote, and the economic information since, has kicked the old model to death. The idea that you could have a Scotland with high public spending, low taxes, a stable economy and reasonable government debt was wishful a year ago—now it is deluded.”

That is the SNP verdict on the SNP plans.

[Mrs Cheryl Gillan (Chesham and Amersham) (Con)]

May I congratulate the Chancellor, both on his leadership in continuing to secure our economic recovery and on his long-term economic plan, which is certainly working? There is so much to welcome in this autumn financial statement. While he is continuing to develop our infrastructure plans, may I ask him also to look at the Government’s promise on the environment? Will he again examine the plans for HS2 and look at extending the tunnelling under the full length of the Chilterns area of outstanding natural beauty—a mere 8.8 km? I think he will find that the savings in time and costs to this project are worth it, as are the savings to the misery of my constituents and many others.

[Mr Osborne]

I thank my right hon. Friend for her support for the statement, and of course she is absolutely right that the sound public finances that are at the heart of what we are seeking to build in our country are vital for the working people of Chesham and Amersham. They also enable us not only to afford big infrastructure projects such as HS2, but to mitigate the environmental impacts. We of course have listened to the representations she has made so forcefully and well on behalf of her constituents to ensure that more of that line is in tunnels through her constituency than would have been the case if she had not fought hard for her constituents. Of course I will always listen to the case she makes, but the plans for HS2 are now well developed and construction is going to start in this Parliament. Indeed, one of the major capital commitments in this spending review is to the budget for HS2, which increases during this Parliament, but I think this is exactly the kind of big infrastructure that this country has not been good at providing in the last few decades and is vital for our future.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I am more interested in the wisdom contained in the big Blue Book from the OBR, page 6 of which says that

“the cost of the tax credit reversal is more than offset by cuts to a variety of other benefits”

but in later years. Will the Chancellor confirm that he has delayed the effective changes in tax credits, not U-turned on them? Page 24 of that book states that

“the terms of the welfare cap are set to be breached in three successive years”.

Will he at least have the guts to send a Treasury Minister, preferably himself, each time—each year—to explain why he has failed his own test?

[Mr Osborne]

First, the welfare cap I set at the summer Budget, which of course was reduced from the welfare cap in the March Budget, was made lower by the tax credit changes that were put forward. Now that we are not going ahead with those tax credit changes, clearly welfare spending—spending on tax credits— is going to be higher in the first couple of years. That is why the welfare cap is exceeded in those years, but then, as the hon. Gentleman can see in the table on that page, the spending comes below the welfare cap and we achieve the £12 billion of welfare savings on which we fought the general election. He opposed those but in the end did not carry the day with the British public. The long-term savings we have made today to housing benefit are less than £1 billion but they continue into the future, and because of the phasing out in respect of tax credits, by the time we get to 2019-20 those tax credit changes were saving only about £1 billion. That is why that is the case, and I think it is part of a sensible plan to help families in the transition, which is what I was asked to consider. I have been able to use the improvement in the public finances to achieve that.

[Stephen Hammond (Wimbledon) (Con)]

We have heard a lot about political careers today. I am sure the Chancellor is on a very different trajectory from the shadow Chancellor. I am not entirely sure that the next minute will help my own, but in the spirt of the Leader of the Opposition, let me read out what David from Wimbledon, who emailed me many times about tax credits over the past month, has just emailed me again to say:

“Can’t fault it so thanks for listening!”

Thank you, Chancellor.

[Mr Osborne]

Obviously, I thank my hon. Friend’s constituent for that comment. If we have improvements in the public finances, we can help families, we can reduce the deficit, as we have done, and we can make the investments in the long-term capital of the country. That is the advantage of having an economic plan that actually produces better results than were forecast, rather than worse results, which is what was happening when Labour Chancellors were giving autumn statements.

[Sammy Wilson (East Antrim) (DUP)]

The shadow Chancellor might wish to push Britain into the red, but we, like many Members, wish to see Britain in the black—I will not be reading anything out of my wee black book, mind you. While the Chancellor has been seeking to balance the finances, he has also listened on housing, tax credits, policing and the Barnett consequentials of HS2 for devolved Administrations. Does he accept that growth is still unbalanced across the United Kingdom and that although Administrations in Northern Ireland have been seeking to promote growth and paying out of a reduced budget for corporation tax, there is still much to be done? What is there specifically in this autumn statement for areas like Northern Ireland, where growth is still lagging behind and where we still need to see improvements in the economy?

[Mr Osborne]

First, I thank the hon. Gentleman for the support he has given to the measures we announced, including the Barnett consequentials for Northern Ireland. I also commend him and his party for the work they have done to reach the agreement with the other parties in Northern Ireland and with the UK Government on the Stormont House agreement, which of course unlocks further resources for Northern Ireland. In this specific spending review, there is an extra £600 million for capital investment in Northern Ireland. In the detail of the books we have produced there are also extra funds for regional air connectivity from Northern Ireland. I believe about 2,000 new flights a year will be able to be funded to and from Northern Ireland—this is a £7 million commitment. Above all, as I mentioned in my statement, if we can get the Northern Ireland Executive budget on a sustainable footing—I know how hard he is working to bring that about—we can achieve that goal of devolving corporation tax and having the 12.5% rate in Northern Ireland, which would make Northern Ireland super-competitive, not just on the island of Ireland but across Europe.

[James Cartlidge (South Suffolk) (Con)]

I congratulate the Chancellor on an excellent statement. In particular, may I assure him that schools in my constituency, which have been underfunded for too long by comparison with those in other areas, will be delighted by his commitment to a fairer funding formula? Does he agree that a one nation education policy needs one national funding formula?

[Mr Osborne]

My hon. Friend is right; this has long been a perverse and arbitrary formula in our education system, which many MPs, from all parties, have campaigned to have changed. A national funding formula is a big step forward in education, and my right hon. Friend the Education Secretary will set out the details. It cannot be right that children in one part of the country can in some cases receive £3,000 less per child than children in exactly the same circumstances—the same level of disadvantage—in some other part of the country. It is not always about shire counties, as some Labour Members have said. A child in Knowsley, for example, is receiving less money today through the funding formula than a child in exactly the same circumstances in Wandsworth, and that cannot be right.

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

The investment in transport infrastructure is very welcome, but the Chancellor also said that the Transport Department would have an operational cut of 37%. Will he tell us where the axe will fall?

[Mr Osborne]

Yes, absolutely. First, the Transport Department had set aside a number of contingency funds, which we do not have to use. We are also phasing out the resource grant for Transport for London, but Transport for London is getting a big capital settlement, which is a large part of the Transport Department’s resource budget, and that is where some of the savings come from.

[David Rutley (Macclesfield) (Con)]

Protecting the science budget and electrifying the TransPennine line are vital tasks to help rebalance the economy. Will my right hon. Friend remind the House how long it has been since he set out the vision for the northern powerhouse, and what has been achieved since then?

[Mr Osborne]

My hon. Friend and constituency neighbour has been a big champion of investment in the north, not just in his constituency but in the north-west of England. My speech on the northern powerhouse, which I gave to an audience that included Labour metropolitan leaders, was last summer. Since then, working across party divisions, we have had agreement now in Liverpool, Greater Manchester, Sheffield, Tees Valley and in the north-east to have a big devolution of power from Whitehall to those areas and elected mayors. There is a huge commitment of transport capital. We have created Transport for the North, which did not exist a year ago, and funded it, and there is a big commitment to the cultural institutions in the north of England as well, so we are talking about a massive commitment. We have also made a big commitment to science institutions across the north, which is something close to his heart.

[Keith Vaz (Leicester East) (Lab)]

I warmly welcome the Chancellor’s decision to increase the counter-terrorism budget and to protect the policing budget, not just because of what happened in Paris but generally for the future of policing. Given that so much organised crime and terrorism are international, is there sufficient flexibility in what he said this afternoon for us to support organisations such as Europol and Interpol, which obviously help us in the work that we are doing?

[Mr Osborne]

Of course we support those international institutions that help us to fight crime. I want to thank the right hon. Gentleman for his support for what we have said today about our police and police funding. The Home Secretary will set out more details about how that real-terms protection will be provided. We do not just provide funding to forces but have a transformation fund, which can encourage the efficiencies that we all want to see in our police, not least the police officers themselves, and make sure that they have the capabilities they need to deal with threats such as marauding gun attacks. It is a real-terms protection, and also, as a minimum, it is a protection in cash terms for the National Crime Agency to ensure that it is funded to do its work as well.

[Suella Fernandes (Fareham) (Con)]

My constituents in Fareham will warmly welcome the Chancellor’s statement today, particularly the announcement of a national funding formula for schools. Hampshire is the third lowest funded authority in the country. Is it not right that this can be delivered only because of the difficult decisions that have been taken on the economy, and that it simply would not have been possible had we ducked those decisions?

[Mr Osborne]

My hon. Friend is right. I am delighted that she has had success in campaigning on behalf of her constituents in Fareham to deliver a fairer funding formula for her local schools and the pupils whom she represents. She is absolutely right that we would not be able to deliver the kind of protection to the schools budget that we have announced today if we did not have a strong economy. The economic security that a strong economy brings is the bedrock of everything else we are achieving.

[Caroline Flint (Don Valley) (Lab)]

Creative though it may be, I never thought that I would see the day when my sex was fined for having a period.

The Chancellor made a lot of the fact that he was phasing out grants to local government. Then he said that there were different ways in which local authorities could raise money for social care or, for that matter, for policing under the police and crime commissioners. I believe in fair funding, and I am sure that he realises that, in more prosperous areas, the take from that sort of raising of funds is higher than for communities such as Doncaster and elsewhere, and it may not be able to meet the challenges on our doorsteps. Is he prepared to carry out an impact assessment on this matter to ensure that funding goes to the areas of greatest need?

[Mr Osborne]

I hope that the right hon. Lady welcomes the decision that we have taken on the money that is raised from the tampon tax—the VAT on sanitary products. The truth is that we have not been able to change the European Union rules. The previous Labour Government tried. Indeed I remember the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), when she was in the Treasury, standing at the Dispatch Box saying that she was trying to get the rules changed. What I have done is provide the best interim solution, which is to set up a fund to support women’s charities. As with LIBOR money, I have been able to help charities that Members from across the House have proposed. Hopefully, we can carry that forward.

On local government, the right hon. Lady makes a very fair point about the regional economic disparities. What I said was that business rates would be retained 100% by local government. There is already a re-allocation of business rates through a tariff system. I propose that, on day one, those tariffs are set in stone. Thereafter any growth in business rate income in that area can go to the local council. An area such as Doncaster—I do not have the details here—might well be already receiving some additional money from the re-allocation of business rates from, say, central London. Thereafter, it would be up to Doncaster council, the local enterprise partnership and the elected mayor in South Yorkshire to ensure that they are doing everything they can to grow the area and get in the investment. I am sure that the right hon. Lady will welcome the investment in small modular reactors, which will be a big boost to that industry in South Yorkshire, which is a world leader in that field.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

I warmly congratulate my right hon. Friend on a truly outstanding statement, and particularly on the 3.7% increase in NHS funding above inflation that he announced. However, he knows that healthcare inflation has always run at about 4%, and that spending in the UK lags far behind countries with which we can reasonably be compared, such as France, Germany and the Netherlands, yet outcomes tend to be inferior. What is he doing to ensure that we plan sustainably for the future in healthcare funding so that we can continue to see the substantial increases in funding that will be necessary in the future?

[Mr Osborne]

I thank my hon. Friend for his support. Hopefully, as both a doctor and a former serviceman, he welcomes the support for the NHS and for our defence forces. On the question of the NHS, what we have done is ask the NHS to come forward with a plan for its own future. That five-year forward view was drawn up by the NHS, independently of us, and put forward by Simon Stevens, who is not affiliated to any political party and who worked for the former Labour Government. That plan, which is supported by the NHS, provides a sustainable future for the NHS. We have fully funded it up front, so that we can achieve the transformations in, for example, primary care that the plan sets out. We are requiring of the NHS, as we are of the public sector, real efficiencies, but in the NHS’s case, those efficiencies are put into the frontline healthcare that he is so determined to champion.

[Several hon. Members rose—]

[Tom Brake (Carshalton and Wallington) (LD)]

I welcome the Chancellor’s decision to scrap tax credit cuts. Does he intend apologising to the people who were unnecessarily scared by his original plans, and does he intend disciplining his peers in the House of Lords who, had they supported the Liberal Democrat motion there, would have saved him from this embarrassing U-turn?

[Mr Osborne]

I said that I would listen and I have—I thought the right hon. Gentleman would welcome the fact that cuts in this Parliament under this spending review will be half what they were in the previous Parliament. Now that we are freed from the shackles of the Liberal Democrats, we can invest even more in our public services.

[Michael Ellis (Northampton North) (Con)]

Does the Chancellor of the Exchequer realise that he is becoming a hero to those who, like me, have campaigned to deal with the perennial plight of potholes on our roads? [Laughter.] That is an area of major concern to millions of people in constituencies all over the country, and by establishing a permanent pothole fund, the Chancellor is helping to deal with a signal problem.

[Mr Osborne]

My hon. Friend is right. [Laughter.] Hon. Members may laugh in the Chamber when we talk about the pothole fund, but as constituency MPs, we know that the state of local roads and potholes is an issue of real concern to people. As a result of the extra investment that we are putting into our roads budget, we are able to increase the maintenance budget. We will not just build new roads; we will improve the roads we have.

[Alison McGovern (Wirral South) (Lab)]

The Chancellor should have come to the House today to say that he has finally dealt with the budget deficit, but he overshot that mark by £60 billion. Does he honestly believe that when he leaves the Treasury for the last time, he will preside over anything but a deficit?

[Mr Osborne]

I have set out the projections to achieve the surplus that have been forecast by the Office for Budget Responsibility, and we made a commitment in the Charter for Budget Responsibility that has been set before the House. More broadly, in the five years that I have stood at this Dispatch Box, I do not think that I have heard a single proposal from any Labour MP for a reduction in Government spending. It is not credible to go on saying, “We want to cut the deficit and cut borrowing”—[Interruption.] Labour Members are shaking their heads. Here is a test: every Labour MP who rises to speak should propose a cut in public spending before they propose an increase.

[Dr Tania Mathias (Twickenham) (Con)]

I congratulate the Chancellor on his veritable listening skills on tax credits. When will he decide on airport expansion, and will his excellent listening skills be ready for my constituents when he does so?

[Mr Osborne]

As I said, I was able to listen to concerns that were raised, including by my hon. Friend, and because of the improvement in public finances we can help families move to the lower welfare, higher wage economy that I know people in Twickenham want. On investment in our infrastructure, I have detailed the plans that we have set out for roads and railways. When it comes to airports my hon. Friend must be patient just a little more because, as she knows, the Government are considering the Davies report and will make a decision on that in due course.

[Helen Goodman (Bishop Auckland) (Lab)]

Table 2.1 in the spending review shows a 56% cut in grant to local authorities, which the Chancellor expects them to make up from business rates and higher council tax. As my right hon. Friend the Member for Don Valley (Caroline Flint) said, that is easier to do in wealthy areas than in poorer areas. Will the Chancellor provide regional analysis that shows what his assumptions are and takes account of the differential spend on infrastructure in different parts of the country?

[Mr Osborne]

My right hon. Friend the Secretary of State for Communities and Local Government will set out details of the local government settlement in due course, and we have taken the opportunity to put floors and ceilings on some of the effects of those changes, relatively to protect certain authorities. Given the area that the hon. Lady represents, I am sure she appreciates that there is a huge amount in this statement to support regional growth and growth in the north of England, and to ensure investment in the transport infrastructure, science and civic power of the north. That will help us to continue what we are seeing at the moment, which is the north growing faster than the south.

[Chris Philp (Croydon South) (Con)]

I welcome the Chancellor’s proposals to introduce a stamp duty premium for buy-to-let landlords and second-home purchasers—an issue that we discussed prior to this statement. Will he confirm that that will encourage homeownership in our country?

[Mr Osborne]

I put on record my thanks to my hon. Friend. He came to see me and we discussed what more we could do to level the playing field so that families trying to buy their own home are not disadvantaged when compared with those purchasing buy-to-let properties in places such as Croydon. We discussed what we could do with stamp duty, and he was one of a number of people who discussed clever ideas about how we could help families to buy their own home. I am glad that his thinking has come to fruition in this autumn statement.

[Hywel Williams (Arfon) (PC)]

We look—sometimes in vain—to the Welsh Government for transparency and coherence. Given the increase in health spending in England, will the Chancellor enumerate in real terms and on a year-by-year basis the consequential increases in funding for the Welsh Government? If he cannot do so now, will he write to me?

[Mr Osborne]

The Welsh block grant will rise in cash terms and will be worth £15 billion—over £500 million more than this year. There is also additional capital investment, and £900 million more is available for investment in Wales. Today we have made the historic announcement about a Welsh funding floor, which addresses long-held concerns in Wales that it is under-protected and not fairly treated by the Barnett formula. We have addressed that by building on work that has been done over many years by people such as Professor Holtham, and I am sure the hon. Gentleman agrees with me that this is a good deal for Wales.

[Mark Menzies (Fylde) (Con)]

Once again I thank the Chancellor for all that he is doing to support the economy of the north of England. My constituency is the powerhouse of the northern economy because we manufacture the nuclear fuel that fuels almost every reactor in the UK. Will the Chancellor do everything he can to ensure that fuel for the new nuclear reactors that he spoke about today is made in Fylde?

[Mr Osborne]

I certainly give my hon. Friend a commitment that we will continue investing in his constituency, which he champions so effectively. We have spoken previously about the enterprise zone at Blackpool airport, and although shale gas development is controversial in his area, it is now supported by a shale wealth fund that will mean money for local communities. He is right to say that north-west England is an area with real expertise in nuclear power, and we have made a big commitment not just on the development of this generation of nuclear power stations, but on the small modular reactors in which there is real expertise not just in south Yorkshire but in the north-west.

[George Kerevan (East Lothian) (SNP)]

The OBR report—at paragraph 1.43, in case the Chancellor has not read it—states that

“there is a roughly 55 per cent chance”

of him meeting his budget targets. Given that 50:50 proposition, will the Chancellor reassure the House that this Budget will not be torn up the way that three previous ones have been in the past 12 months?

[Mr Osborne]

The OBR assesses the Government against our fiscal targets, and that is the point of having an independent fiscal council. May I make a suggestion to the Scottish Government and the Scottish nationalists? Why not get on and create an independent fiscal council in Scotland? It is something they are refusing to do.

[Helen Whately (Faversham and Mid Kent) (Con)]

As my right hon. Friend knows, this summer Operation Stack brought Kent to a standstill, so I welcome his announcement of a quarter of a billion pounds investment in Kent’s infrastructure to keep Kent moving. Does he agree that investment in infrastructure is vital for Britain’s economic growth, national security and public services?

--- Later in debate ---

[Mr Osborne]

My hon. Friend came to see me to fight on behalf of her constituents who see their lives disrupted when the channel tunnel is blocked and lorries queue up on the motorways and block local roads. She, together with other hon. Friends with constituencies in Kent, came to me with a proposal to relieve that congestion and the impact of Operation Stack. We are making a quarter of a billion pounds commitment to the county of Kent to help it deal with that traffic problem and provide a permanent solution.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

As my right hon. and hon. Friends have been telling the Chancellor, he is trying to push the issue of underfunding of social care on to local councils. A total of £4.6 billion has been taken out since 2010, and the gap is growing at £700 million a year. As my right hon. Friend the Member for Don Valley (Caroline Flint) said, there is fourfold difference between the ability of different areas of the country to raise funding through the 2% council tax increase. How is he going to close this gap when there is no extra funding from the better care fund until 2017?

[Mr Osborne]

Overall funding for social care will be protected in real terms. The council tax premium can be levied, and the better care fund will have an additional £1.5 billion to make sure that it can help local government integrate with the national health service. Our objective is to achieve over the next five years the integration of health and social care services across the country. Places such as north-east Lincolnshire, Northumberland and Greater Manchester have made big progress in this area, and I hope that the hon. Lady’s local area also takes steps in that direction.

[Mr David Burrowes (Enfield, Southgate) (Con)]

I welcome this compassionate Conservative statement with, for example, councils receiving £10 million more up front to tackle homelessness in their local areas. Will the additional £105 million pledged over the course of the Parliament to tackle complex needs of homelessness, mental health and youth unemployment be delivered through the roll-out to the troubled families programme, delivering social justice for single persons with complex needs?

[Mr Osborne]

I thank my hon. Friend for his support and for the work that he has done to champion the most disadvantaged and vulnerable in our communities. The troubled families programme is protected and supported in this spending review. The money for social impact bonds to help with complex social needs in our society is additional to that, as is the extra support for homeless people, which will go direct to councils rather than through the benefits system and have an extra £10 million put into it. There are a number of pieces of good news.

[Jack Dromey (Birmingham, Erdington) (Lab)]

Just days ago, our police service, reeling from the biggest cut in Europe of 17,000, was facing the catastrophe of being cut in half. Now, following pressure from the public, the police and the Labour party, the Chancellor has thought again, including embracing our proposals for sensible savings on procurement. Does he agree that the first duty of any Government is the safety and security of their citizens, and that a U-turn, however begrudging and belated, is to be welcomed?

--- Later in debate ---

[Mr Osborne]

The first duty of Government is to protect the people. Because we have a strong economy, we can not only invest in our defence overseas but protect the public at home with the real-terms protection for the police, which comes on top of the increase in community support officers in the previous Parliament and the greater proportion of our police on the frontline. The hon. Gentleman says that the Labour party is championing the police’s cause. I do not know where he stands in the civil war taking place in the Labour party at the moment, but those who currently lead it have spent their entire lives undermining the police, campaigning against them, and criticising them. That is what the public are going to judge the Labour party on.

[Alex Chalk (Cheltenham) (Con)]

I warmly welcome the Chancellor’s announcement of a boost in funding for our security services, who do so much unsung work to keep us safe. Does he agree that the creation of a cyber-innovation centre in Cheltenham will mean that those extra taxpayer funds will not just enhance our national security but boost private sector jobs and opportunity?

[Mr Osborne]

My hon. Friend is absolutely right. He represents some remarkable people who keep us safe, working at GCHQ in Cheltenham. I was very pleased to meet him at GCHQ headquarters last week, with local businesses that are growing cyber-business in Cheltenham, creating jobs and making sure that GCHQ is not just a source of jobs in the public sector in Cheltenham but jobs in the private sector. The new cyber-innovation centre and the work we are going to do in Cheltenham will only go from strength to strength.

[Wes Streeting (Ilford North) (Lab)]

In 2007, Martin Lewis of moneysavingexpert.com and I were asked by David Willetts to lead an independent campaign for student finance information, and we agreed on the basis that we thought it would be better that people were able to make an informed choice and not be deterred from studying. Imagine my disappointment, then, at finding on page 93 of the book that student finance repayment conditions are not only being changed regressively but applied retrospectively. Not only do I regard this as a personal betrayal, but how can any applicant trust the information they are given by Government at the point of application? Furthermore, what message does the Chancellor think he is sending to the nursing profession and aspiring nurses that they should pay for the privilege of a profession in which they have to work incredibly hard for not particularly good pay? What an absolute outrage—he should apologise to students and to nurses.

[Mr Osborne]

One would not have guessed from the hon. Gentleman’s outburst that it was a Labour Government who introduced tuition fees and a Labour Government who introduced top-up fees. I think it is perfectly—[Interruption.] The truth is this: Labour Members got into opposition, they became completely irresponsible, and they have no economic plan and no economic credibility. Part of that was opposing the very student fees that they had themselves introduced when in government. The changes we are making to student fees enable us to expand student places. They not only remove the cap on nurse training places, whereby at the moment over the half the applicants are turned away, and as a result hospitals have to rely on agency staff and nurses from overseas, but expand student places across our universities in all disciplines. I would have thought that the hon. Gentleman, as a former head of the National Union of Students, would welcome that.

[Nicola Blackwood (Oxford West and Abingdon) (Con)]

I thank the Chancellor for listening to the Science and Technology Committee and protecting science and innovation spending, which will mean more high-value jobs, higher productivity, and more inward investment. However, does he agree with us that we will realise the full value of this settlement only with better co-ordination between capital and resource allocations so that our researchers and innovators achieve their full potential for the United Kingdom?

[Mr Osborne]

I thank my hon. Friend for her words of support and for the work that she has done as Chair of the Science and Technology Committee. She made exactly the same point to me in person—that as well as providing capital support for science, we had to provide resource support to make sure that the facilities were well funded and could operate throughout the year. That is why we have increased the science resource budget and made sure that it now goes up in real terms. I know that she will want to look at Paul Nurse’s report, which is about making sure that we better co-ordinate our scientific research activity across the country.

[Jess Phillips (Birmingham, Yardley) (Lab)]

I very much welcome the Chancellor’s announcement about how the tax that I pay on my sanitary products will now be spent on women’s health charities. Will any of that money be spent on domestic and sexual violence charities? Will it be better spent than the money he announced in his Budget, which provided 27p for each woman who lived in a refuge, is only being given out now, and has to be spent by the end of March, pretty much helping no one for about four months?

[Mr Osborne]

The £15 million from the tampon tax will be available to charities that support women: not just women’s health causes but domestic violence causes, where they do brilliant work. I have announced the allocation to four charities, some of which are already involved in domestic abuse prevention. Having listened to the hon. Lady over the past few months as a new Member of Parliament, I suspect that we will not agree on many things in this Parliament, but if she has some good causes that she would like to be funded by this money, I will take a very serious look at them.

[Huw Merriman (Bexhill and Battle) (Con)]

I welcome the devolved powers on business rates and adult social care funding to local authorities. In my constituency, we desperately need to attract more business to pay for an ageing population. With that in mind, will the Chancellor restate his support for the High Speed 1 link between my constituency and the neighbouring constituency of Hastings and Rye?

[Mr Osborne]

I am happy to restate my support for the Javelin travelling to Hastings and supporting my hon. Friend’s constituents in Bexhill and Battle. We are also investing in the roads in his area, because it is a particularly congested part of the south-east. There are lots of exciting things happening on the south coast at the moment, as businesses come in and the university in Hastings—where some of the people he represents work—grows. I am very happy to look at anything more we can do to boost businesses in my hon. Friend’s constituency.

[Alex Salmond (Gordon) (SNP)]

When the Chancellor sat down after his summer Budget, he had a 50% chance of becoming the next Prime Minister. This morning it was estimated to be 25%. Mike Smithson, a former Liberal Democrat councillor who runs the Political Betting website, has invented a surefooted money making scheme: he buys the Chancellor on the day of his statement and sells his stock as the Chancellor’s plans unravel in the following weeks and months. What guarantees can the Chancellor give the House that he is not back in bed with the Liberal Democrats and involved in the same sort of nefarious scheme to buy himself short and sell out the rest of us long?

[Mr Osborne]

To be honest, I am not going to take advice from the right hon. Gentleman about political projects that do not come to anything. He tried to make his country independent, but the people of Scotland had the good sense to say no.

[Mr Robin Walker (Worcester) (Con)]

I congratulate the Chancellor on the way in which he balanced efficiency with compassion throughout his statement. He was as right to invest more in the NHS and housebuilding as he was to clamp down on tax avoidance. To keep up investment in our vital public services, we need to increase our income, both nationally and as individuals, so we need to keep investing in skills. Will the Chancellor expand on how his funding for apprenticeships and the apprenticeship levy will help smaller businesses to invest in skills?

[Mr Osborne]

The apprenticeship levy and the commitment we have made to 3 million apprentices is a huge boost to skills in this country, and it addresses one of the endemic weaknesses in the British economy that has bedevilled us for many decades. Small businesses are a big winner from the scheme: they do not have to pay the levy, but they get the advantage of the funded apprenticeships. We are also increasing the amount we pay for some of the apprenticeship courses. Indeed, there is a general uplift in apprenticeship funding. This will help small businesses, which do so much to support our economy, but which did not always get the support they wanted for training in the past.

[Stephen Timms (East Ham) (Lab)]

The local government grant is available because some local authorities have a lower tax base than others. Can the Chancellor reassure us that the same necessary degree of rebalancing will be delivered once the grant has been phased out?

[Mr Osborne]

The reallocation of business rates, which takes place after we allowed local authorities to retain 50% of their business rates in the last Parliament, will be in place from day one. Thereafter, local areas, such as the right hon. Gentleman’s, will have strong incentives to attract businesses to their area. They will be able to cut business rates, if they would like to bring in those businesses. Frankly, I think that will also help with speeding up planning decisions and encouraging local economic development. We all know that the trouble is that there is always a cost to local councillors saying yes to developments in our constituencies. It is often controversial and they do not see the benefits. Councillors will now see the benefits, and, more importantly, so will local communities.

[Christopher Pincher (Tamworth) (Con)]

Over the past three years, Jaguar Land Rover has doubled the size of its workforce in the west midlands—a job made easier by our skill base. In welcoming the jobs news the Chancellor has given us, may I ask him to say a little more about how he is going to help automotive firms recruit locally, not least from the Torc vocational centre in Tamworth, whose automotive hub has received a £2 million grant from Conservative-controlled Staffordshire County Council?

[Mr Osborne]

I thank my hon. Friend’s Conservative council for the support it gives to the car industry, and I thank him for championing the industry in this House. We have made a commitment not only to maintain the money we are putting into our automotive strategy, but to continue doing so for the next 10 years. Obviously, product lines at JLR and other important car firms take many years to develop and invest in. I am sure that long-term commitment to our brilliant car industry will be very welcome.

[Ruth Smeeth (Stoke-on-Trent North) (Lab)]

Following on from questions asked by colleagues, led by my right hon. Friend the Member for Don Valley (Caroline Flint), will the Chancellor outline exactly what today’s autumn statement means for cities such as Stoke-on-Trent, sitting between Greater Birmingham and Greater Manchester, with little family silver to sell in terms of assets, and with 94% of my residents living in properties in council tax bands A, B and C? What are we meant to do without the local government block grant and with business rate revenue that will not fill the gap?

[Mr Osborne]

The reallocation of funding within local government continues to support poorer areas of the country such as that represented by the hon. Lady. There is now a huge set of incentives for the local community, local businesses and the local council to grow Stoke-on-Trent and see the benefits. They can work with us to make that happen. I am very happy to discuss what more we can do for Stoke and, of course, what more we can do to ensure that Stoke co-ordinates with Crewe and Cheshire East authority, which my constituency sits in and where there are lots of exciting plans to do more together.

[James Berry (Kingston and Surbiton) (Con)]

The security of our nation starts at home, so may I welcome warmly the excellent news that the police budget will be protected in real terms and that an additional 30% will be spent on counter-terrorism? Does my right hon. Friend agree that protecting or increasing spending in important areas such as the NHS, schools and policing is simply not possible if difficult decisions are not made about public spending elsewhere, and that ideas for such spending cuts are never forthcoming from the Labour party?

--- Later in debate ---

[Mr Osborne]

My hon. Friend is absolutely right. I am sure that the decisions taken on the NHS, education and policing will be very welcome in his constituency. They will enable us to deliver on the promises he made to local people. It is very easy for people to get up and say, “We want more money spent on this and more money spent on that,” but I do not think I have yet heard an answer to my challenge to the Labour party to come up with a single public expenditure saving.

[Mr Ronnie Campbell (Blyth Valley) (Lab)]

Trident.

[Mr Osborne]

There you go—Trident. That is the modern Labour party: it wants to get rid of our nuclear deterrent. Some Labour Members are now shaking their heads. May I make a polite suggestion? Why does not the Labour party sort out its policies and then come to the House of Commons and tell us what they are?

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I welcome the Chancellor’s announcement of increased mental health funding, especially as it follows a cut to the mental health tariff in the last Parliament. Given last week’s research findings, which showed a clear link between the Government’s own work capability assessment policy and an increase in suicides and other adverse mental health effects since 2010, how much of the increased funding will be spent on ameliorating the adverse effects of the Government’s own policies?

[Mr Osborne]

It is generally accepted across this House that mental health services in the NHS have not always had the support they need over many decades and that we have not always had equality of treatment in the NHS. We have now made that change in the constitution of the NHS. Today I have announced £600 million extra funding for mental health, on top of what was announced at the March Budget. That will help with access to talking therapies and to perinatal mental health services. I would have thought and hoped that the hon. Lady welcomed that.

[Lucy Frazer (South East Cambridgeshire) (Con)]

I commend the Chancellor’s commitment to the fairer funding formula. How precisely will it help students in Cambridgeshire, who historically have received about £2,000 less per pupil than those in some other areas of the country?

[Mr Osborne]

The current funding for schools is arbitrary and unfair. Children in different areas but with exactly the same circumstances can receive many thousands of pounds in funding at their schools, depending on where in the country they live. Cambridgeshire is one of the areas that has been underfunded historically. The new national funding formula will help address that unfairness. My hon. Friend has been championing that cause, and my right hon. Friend the Education Secretary will set out how the formula is going to work.

[Mr Ronnie Campbell]

Has the Chancellor got any plans to bring in more privatisation to the health service?

[Mr Osborne]

Our national health service is publicly run, free at the point of use and now well funded under this Conservative Government.

[Victoria Atkins (Louth and Horncastle) (Con)]

May I thank my right hon. Friend for his commitment to fairer funding for schools so that the children in my constituency can get a fairer deal? On the subject of education, will he join me in thanking the shadow Chancellor for sharing his favourite book with us and therefore designing my next campaign leaflet?

[Mr Osborne]

My hon. Friend is absolutely right to champion the schools in her Lincolnshire constituency and to draw attention to the fact that the funding formula has not been fair to her constituents. That is why we are getting rid of it and introducing a new national funding formula, which will help to make sure there is a fair deal for Lincolnshire schools.

Having had a chance to look at it, I have discovered that this is a pretty well-thumbed copy of the little red book, so I do not think this is the first time that the shadow Chancellor has read from it.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

The Chancellor has been forced into a humiliating climbdown on tax credits. That will at least give a stay of execution to some of the affected families. However, from what we have heard today, hundreds of thousands of social sector tenants now face losing money because of his austerity agenda. Why is he determined to put low-income households on the frontline?

[Mr Osborne]

We are saying that rents in the social sector should not be higher than rents in the private sector in a particular area. It has to be said that in most parts of the country they are not higher, but there are some parts of the country where they are. This is perfectly fair—fair to those who pay for our welfare system, fair to those who rely on it. It is only for new tenancies.

I would make the broader observation that if the Scottish nationalists want to do something about housing benefit, they should agree the fiscal framework and make use of the powers they are being offered in the Scotland Bill. As always, they want to duck responsibility for decisions that we have devolved to them and the Scottish Government. They should stop arguing about the process—Lord Smith has put an end to that argument—and get on and agree the framework, and then they can defend the decisions that they take on housing benefit in future.

[Several hon. Members rose—]

[James Morris (Halesowen and Rowley Regis) (Con)]

As the chairman of the all-party group on mental health, may I welcome the Chancellor’s announcement of additional money for mental health? Does he agree that that is a first step in delivering our manifesto commitments on mental health, which not only is right in principle, but will put mental health at the centre of our national health service in the future?

[Mr Osborne]

My hon. Friend has been a great champion of mental health, and he is right in what he says.

[Barry Gardiner (Brent North) (Lab)]

This morning, the Government released the figures for the highest number of excess winter deaths this century—43,900—yet, in his statement, the Chancellor has cut the ECO budget, which was designed to improve home insulation, by 60%. How does he reconcile those figures?

[Mr Osborne]

We are ensuring we have an efficient home efficiency scheme, and at the same time we are cutting the energy bills for families. I remember the Labour party in the last Parliament—it did not do Labour Members any good in the end—campaigning to freeze energy bills. They should be welcoming this cut in energy bills.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

Time does not permit me to list all that is welcome in the Chancellor’s statement for residents of Dorset and the south-west, but I must mention Dorset Green, the new Dorset enterprise zone, which is incredibly welcome, and perhaps most importantly of all, the fairer funding formula for our schools in Poole and Dorset, which have until now been among the worst funded in the country.

[Mr Osborne]

My hon. Friend is a great champion of his Poole and Dorset constituents. The enterprise zone is going to be a great success in Dorset, and the funding formula will of course help schools in Dorset.

[Cat Smith (Lancaster and Fleetwood) (Lab)]

I thank the Chancellor for clarifying that the £15 million raised from the tampon tax will go to domestic violence charities as well as to women’s health charities. Given that women have gone from paying a luxury tax to what is in effect an insurance payment in case they have to flee violence, will he, in the interests of equality, consider a tax on lads mags to fund prostate cancer, or do only women have to pay for the price of their own services?

[Mr Osborne]

I think the hon. Lady should be fair about the situation that the United Kingdom finds itself facing. When she was Chief Secretary to the Treasury, the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) gave a very clear explanation of why, because of EU rules, the United Kingdom cannot reduce VAT on sanitary products below 5%. It is no good just standing up and asserting that we can do this, when Labour Ministers have stood at the Dispatch Box and explained why it is not possible. We will continue to campaign, as the previous Labour Government did, to get rid of that tax in the EU, but in the meantime, we are doing something they did not do, which is to take the money and put it into a fund. I ask the hon. Lady to come forward with some good causes that help both women who suffer from domestic violence and women’s health charities so that they can be funded from that pot.

[James Heappey (Wells) (Con)]

Amid the all the wonderful news for Somerset on road and rail infrastructure, will the Chancellor reassure us that he remains fully committed to connecting 100% of homes to superfast broadband?

[Mr Osborne]

There is a £1.7 billion superfast broadband programme, which will help in the west country. Of course, we are also looking at a universal service obligation on telecom providers—as we have on other utilities—to help my hon. Friend’s constituents.

[Stewart Malcolm McDonald (Glasgow South) (SNP)]

The Burrell Collection refurb is vital for pulling visitors to the south side of Glasgow in my constituency, so I welcome the announcement of £5 million of funding. Will the Chancellor go a little further and commit to meeting me and local people who are keen to build up the south side as a tourist place in Glasgow so that we can really raise its profile?

[Mr Osborne]

I am very happy to meet the hon. Gentleman and, indeed, anyone he wants to bring with him. If there are sensible projects in Glasgow that we can fund, we will of course look at them. My view is that the Barnett formula and the block grant to Scotland does not mean that the UK Government have done all we can do to help Glasgow. That is why we have the city deal and why we are supporting the Burrell Collection today. If he has some other good ideas, we will be able to fund them too.

[Martin Vickers (Cleethorpes) (Con)]

Some £355 million is allocated for flood defence schemes in the Yorkshire and Humber region. Will my right hon. Friend give us an assurance that the strategically important Humber ports will be prioritised within that allocation?

[Mr Osborne]

My hon. Friend has been a doughty champion of flood defences on the Humber. As he well knows, the Environment Agency is looking at the big, long-term scheme that has been put forward there. I will make sure it takes a serious look at what it can do to protect industries in his constituency.

[Diana Johnson (Kingston upon Hull North) (Lab)]

Continuing with the Humber theme, I welcome the Chancellor’s announcement of the £1 million for Hull city of culture 2017, which I think takes the total to £5 million. If he is really serious about the northern powerhouse and investing in the arts in the north, may I gently point out to him that that compares very badly with the fact that an arts campus in Battersea is getting £150 million, an unspecified arts project at the Olympics site will get money and there is an additional £150 million for London museums? Will he think again about what the northern powerhouse and the arts actually mean?

[Mr Osborne]

I do not think the sum the hon. Lady gave for the Battersea project is quite right. I make no apology for saying that we should invest in our great national museums wherever they are—the Museum of Science in Manchester, the Burrell Collection in Glasgow, or the Science Museum and the V and A in London—because they are all part of what makes the United Kingdom a fantastic place to visit and to live in. I will look seriously at proposals she puts forward for investments in the arts in Yorkshire. As she will see in the autumn statement, we have made a big investment in the arts in Manchester with the commitment to Factory Manchester. We have previously committed money for the Turner Collection to come to Hull, and we have already renovated a number of museums in Hull. Does she have new ideas? Her constituency neighbour, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), made a request to me and I have funded it, which I am glad she welcomes.

[Iain Stewart (Milton Keynes South) (Con)]

In the welcome context of increased capital investment in transport, may I ask my right hon. Friend to say more about the progress of the Hendy review, particularly the east-west rail project that is vital to unlocking economic and housing growth in Milton Keynes and Aylesbury Vale?

[Mr Osborne]

Peter Hendy is doing an excellent job in sorting out the finances of Network Rail. We funded the projects in control period 5 and funded additional spill-overs into control period 6. East-west rail is an important project and it will go ahead.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The autumn statement confirms the Chancellor’s climate change exemptions, which leave energy-intensives such as steel companies no better off cash-wise. The partial exemptions from renewables obligation certificates and feed-in tariffs, which are now to end in four months anyway, leave the Chancellor’s new permanent exemption as close to worthless as it gets. The Chancellor announced four years ago an exemption to his carbon price floor tax. Where is it?

[Mr Osborne]

We are providing a permanent exemption to the maximum amount allowed by EU state rules for steel industries in the hon. Gentleman’s constituency and elsewhere, as well as chemicals and other energy-intensive industries. This will be a permanent exemption, rather than a grant from the Department for Business, Innovation and Skills. That makes it much more sustainable going forward.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I welcome the £50 million investment in our agri-tech centre at Sand Hutton and the protection for our North York moors, both of which are in my constituency. I welcome the apprenticeship levy as well. Will the Chancellor welcome the comments made during my visit to Karro Foods that the apprenticeship levy would allow it to employ more local people and fewer people from abroad?

[Mr Osborne]

My hon. Friend is right that we have been able to boost skills in his Yorkshire constituency. We have been able to fund the great national parks of Yorkshire. We have also been able to invest in one of our great British industries, which has not always got a mention in Chancellors’ speeches in the past—farming. The big investment that we are making in agri-tech science with those four centres around the country, including one in York, will be very welcome.

[Jenny Chapman (Darlington) (Lab)]

Can the Chancellor explain why the OBR has just forecast that household debt to income levels are set to rise to above pre-crash levels?

[Mr Osborne]

The OBR is forecasting a rise in household debt which is partly reflected in a rise in house prices and therefore household assets, against which the debt is secured. But of course there is a big difference from the unsecured debt that we found in 2008. The big difference we now have is a Bank of England with a Financial Policy Committee, which is able to step in when it sees debt levels reach worrying levels. The Governor of the Bank of England signalled before the Treasury Committee yesterday concern about buy-to-let prices, for example, and he is receiving the powers to do something about it. That is a big change from the situation five years ago.

[Richard Drax (South Dorset) (Con)]

My constituents in South Dorset will want to thank my right hon. Friend for the enterprise zone at Winfrith Green, which is going to create thousands of jobs, for looking again at the education funding, which was very unfair to Dorset, and for the incentives to take on apprenticeships, which is so important for the future economy and particularly for the young people of this country.

[Mr Osborne]

I thank my hon. Friend. Dorset is a fantastic county. The enterprise zone will be a great success. Schools in Dorset will be boosted by the announcement today on the funding formula. He is absolutely right—we want great jobs in Dorset that are available to local people, so the apprenticeship support will mean that local people have the skills to get those jobs.

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

I see on page 14 of the autumn statement that the Chancellor forecasts public sector net borrowing increasing significantly from 2014 through 2019, then almost miraculously hitting the Chancellor’s £10 billion surplus target by 2019-20. How can he be sure of keeping interest rates low enough for long enough to even have a hope of hitting this most optimistic of targets in this decade of austerity?

[Mr Osborne]

I do not know whether the hon. Gentleman misread the table, but public sector net borrowing is shown on page 14 as falling in every year, then it reaches a surplus.

[John Glen (Salisbury) (Con)]

I thank the Chancellor for his unswerving commitment to welfare reform, enabling him to invest in schools, defence and the NHS, and in particular for his investment in infrastructure. Can he confirm that he will continue to take a close interest in the future of science jobs at Porton and the planned investment in the A303 at Stonehenge?

[Mr Osborne]

I can give my hon. Friend that assurance. I am very keen to support the Porton science hub that he has championed and to make sure that as the public health laboratories move over a period of years, we build up a strong science hub there. That will be helped by the improved transport connections, including the huge billion-pound or so investment in the A303 past Stonehenge in his constituency.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

Given the Chancellor’s unwillingness—surely not inability—to answer any of the questions posed by my hon. Friend the Member for Dundee East (Stewart Hosie), may I ask him again how much has been set aside for reconstruction in Syria?

[Mr Osborne]

The overseas aid budget, which is going up substantially as our economy grows, is being refocused so that as well as helping the world’s poorest— for example, in sub-Saharan Africa and in countries such as Pakistan—we will also have money to help those states on the borders of Europe that are fragile or failing. Some 50% of our overseas aid budget will go towards those fragile and failing states in the world. We are therefore able to increase the resources going to Lebanon, Jordan and the camps in Turkey that are helping the refugees of that terrible crisis. I hope the SNP will look carefully at the arguments that my right hon. Friend the Prime Minister will make tomorrow in this House.

[Andrew Percy (Brigg and Goole) (Con)]

I welcome the Chancellor’s recalibration of tax credits. In my dealings with him on the subject, he was always prepared to listen, polite and understanding of the concerns. On flood defence funding, he mentioned the Humber scheme on which he worked with the Environment Agency. That has now gone back to the EA, which has pooh-poohed the very proposals that it worked with us to create. That is extremely important for the Humber. Can my right hon. Friend assure us that he will do everything to work with local MPs to come up with a scheme that properly defends the Humber and all the investment that we have got coming?

[Mr Osborne]

I can give my hon. Friend that assurance. I thank him for what he said about the fact that we have had a very constructive dialogue. I have always been prepared to listen to the concerns that my hon. Friend raises, which I always think are heartfelt. On the Humber, we worked together to cut the bridge tolls, to get the enterprise zone, to get the Siemens factory there and to get the new roads to places such as Immingham. On the flood defences, I know that this has taken time, but we are trying to work on a sustainable solution that will protect the businesses of the Humber estuary. I know that he feels very strongly about it, as does my hon. Friend the Member for Cleethorpes (Martin Vickers), his neighbour. Let us work together and see if we can move forward with the Environment Agency. It has a rigorous way of assessing these projects. Let us try and make sure that the scheme meets those assessments.

[Nic Dakin (Scunthorpe) (Lab)]

When the Chancellor says that he will permanently exclude energy-intensive industries such as steel from environmental taxes, is he including the carbon floor tax which the Government unilaterally introduced in previous years?

[Mr Osborne]

The exclusion on the energy bills is for the various tariffs, such as feed-in tariffs. We are announcing at the Budget the results of our long-term consultation on energy taxes—we announced at the Budget earlier this year that it would take place—so we will have an answer for the hon. Gentleman then.

[Matt Warman (Boston and Skegness) (Con)]

Across every Government Department the Chancellor is investing in a nationwide digital revolution, which I warmly welcome. Will he heed the more than 100 Members of Parliament across this House who have asked him to invest in broadband to make all that possible?

[Mr Osborne]

We have got the £1.7 billion. We are committing to the superfast broadband rollout that will take it to 95% of the population. We are, as my hon. Friend knows, looking at a universal service obligation on the telecoms companies to reach more customers, as the other utilities already have. He is right that broadband is vital for the economic future of this country and helps rebalance our economy not just geographically from south to the north, but in the rural areas of our country, where it is now possible to run successful international businesses in a way that was not possible a decade ago.

[Neil Gray (Airdrie and Shotts) (SNP)]

The Blue Book adds just a little detail to the Chancellor’s announcement of the expansion in social security conditionality. It is estimated that 1.3 million people will be caught up in this. Can the Chancellor say whether he will be dragging the sick and disabled to jobcentres every week?

[Mr Osborne]

There is additional support for disabled people who want to get into work. There is help for people who have been unemployed for 18 months through our help to work scheme. The additional conditionality that the hon. Gentleman refers to relates to people who are currently on housing benefit but do not face that conditionality. Housing benefit is becoming part of universal credit, so that is one category of people we can extend the conditionality to.

[Craig Mackinlay (South Thanet) (Con)]

May I follow my hon. Friend the Member for Faversham and Mid Kent (Helen Whately) in offering words of thanks from the people of Kent for the £250-million commitment to find a permanent solution to Operation Stack? Kent MPs should go and see the Chancellor more regularly. Does he agree that Kent, which is on the frontline of cross-border trade and movement of people, deserves special treatment and, at times, spending?

[Mr Osborne]

Kent is a very special place as the garden of England. My hon. Friend and other hon. Friends from Kent came to see me and made a compelling argument about what happens to local roads when the channel tunnel is blocked and how that affects his constituents and people in Folkestone near the tunnel mouth. We are making a quarter of a billion pound commitment to finding a permanent solution to that problem. I congratulate him and other Kent MPs on a successful campaign.

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

I am sure that the Chancellor merely forgot to answer the questions of my hon. Friends the Members for Dundee East (Stewart Hosie) and for Kirkcaldy and Cowdenbeath (Roger Mullin) on the rebuilding of Syria, so I will give him another chance. If the Government persuade the House to back military action, how much has he set aside for the city deals for Aleppo, Damascus and Homs?

[Mr Osborne]

As I have said, we have an increasing overseas aid budget and 50% of that budget will go to failing states. I assure the hon. Gentleman that if there was a political solution in Syria that enabled the Department for International Development to go to Aleppo and Damascus, we would be able to spend considerable sums on rebuilding those cities. It is frankly a bit unrealistic of the Scottish nationalists to ask about the city deal for Aleppo when it is in the middle of a civil war that we are all trying to bring to an end.

[Tom Pursglove (Corby) (Con)]

I strongly welcome my right hon. Friend’s announcements on police spending and the progress that is being made on exempting the steel industry from green taxes. Those are issues that I am hugely passionate about, as are my constituents. Will he clarify, however, when the exemption will kick in?

[Mr Osborne]

My hon. Friend, who I believe is the son of police officers, made a persuasive argument to me about what we could do to our police when we discussed that matter. He has done his parents and his constituents in Corby proud. The support for energy intensive industries has been provided by the Department for Business, Innovation and Skills out of its departmental budget this year. In the years ahead, it will be provided as an exemption from the green tariffs.

[Peter Dowd (Bootle) (Lab)]

In addition to the threat to thousands of Revenue and Customs jobs in my constituency, proposals have been announced by Webhelp and Shop Direct, which has the Very and Littlewoods brands, to transfer 400 call centre jobs to South Africa. What in the statement will encourage such companies to remain or, as the Chancellor puts it, stay here in Britain, especially in the light of the cuts to departmental budgets?

[Mr Osborne]

The way in which we can support the hon. Gentleman’s constituents and ensure that businesses invest here is by being a competitive place to do business. He is right to draw attention to the fact that companies can choose to locate anywhere in the world. How do we address that? We make Britain the place to invest and we make Liverpool the place to invest, so that we attract those businesses here. Investment is coming into this country. Indeed, Britain has attracted more investment than the rest of Europe. As I set out today in the autumn statement, overall investment in our economy is going up by more than investment in any other G7 economy this year, and it will go up more here next year and the year after than in any other G7 economy. That will produce the jobs that he wants for his constituents.

[Dr James Davies (Vale of Clwyd) (Con)]

I thank the Chancellor for an autumn statement that will be welcomed by my constituents in the Vale of Clwyd. Over the past few months, I have received several representations about the need to meet the growing cost of social care in north Wales. How will the very necessary new social care precept and the increase in the better care fund apply to Wales, bearing in mind the fact that local government functions are devolved?

[Mr Osborne]

The Barnett formula consequentials will apply. I am happy to write to my hon. Friend on the specific support that we can give to social care in Wales. As I say, his constituents will be beneficiaries of the relative protection for the NHS and things like social care in England through the Barnett formula. Crucially, the new funding floor will also provide protection. I will write to him specifically about the devolved arrangements in social care.

[Alison Thewliss (Glasgow Central) (SNP)]

First, I associate myself with the comments made by our Labour sisters about the tampon tax. I am glad to see that the Chancellor is helping the SNP to implement at least one aspect of our manifesto.

I have been asking the Chancellor since his statement in July how he intends to make women prove that they had their third child as a result of rape. There are still no answers on that and the two-child policy still applies, despite his U-turn on the tax credit cuts.

I would also like to ask about the limiting of housing benefit and pension credit to four weeks for claimants who go abroad. Will there be protection for people who have to go abroad as a result of a bereavement in their family?

[Mr Speaker]

All those matters are of the highest importance and I know that the Chancellor will respond diligently, but sometimes Members suffer short-term memory loss, so perhaps I should just remind the House of the merits of pithy questions.

[Mr Osborne]

The last point that the hon. Lady raised was a perfectly fair one. At the moment, people can leave this country for up to 13 weeks and continue to receive housing benefit and pension credit, without any explanation of why they left. That is a very long time for the people she represents and the people I represent to pay the housing benefit of someone who is not even in the country and is not living in the house for which the housing benefit is being paid. We are reducing that to a month, which is still quite a long period. There will be arrangements and discretionary support to help people who face exceptional circumstances of the kind that she describes, such as a bereavement.

As part of the Welfare Reform and Work Bill, we will come forward with the results of the work and consultations that we have undertaken on the issue she raises about rape and violence.

[John Stevenson (Carlisle) (Con)]

I thank the Chancellor and congratulate him on securing an enterprise zone for Carlisle. It is hugely significant for the area and I look forward to his visiting when the site is full. Does he agree that if business is to invest in places such as the Carlisle enterprise zone there must be financial stability and consistency of policy? Does he agree that it is important that business success is central to Government policy?

[Mr Osborne]

My hon. Friend is absolutely right. He is a champion of bringing businesses to Carlisle. I have made a number of visits with him to Carlisle businesses, including a sawmill and construction sites that are providing new homes for people there. He is right that none of those things is possible—people do not build houses and businesses do not expand—if there is no economic security and no confidence in the long-term plan of the Government. We have been able to provide a new enterprise zone for Carlisle, and buried in the detail of the document there is extra support for air routes from Carlisle as well.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I ask the Chancellor to answer this question without any bluster about oil and fiscal frameworks. In fact, I ask for a one-word answer. In real terms, over the course of this Parliament, will the Scottish revenue grant suffer a Tory cut?

[Mr Osborne]

The block grant is going up, and there is a big increase in the capital budget. If the SNP had had its way and Scotland had become independent, there would have been savage cuts, because the OBR has just confirmed a massive fall in oil revenue income, which would have devastated Scotland. Thankfully, Scotland is part of a strong United Kingdom.

[Several hon. Members rose—]

--- Later in debate ---

[Nusrat Ghani]

Thank you, Mr Speaker.

A good education not only enables our children to reach their full potential but is empowering, and we now have 1 million children attending good or outstanding schools. May I thank the Chancellor for protecting our schools budget and for the good news about the commitment to a new funding formula, which will mean so much to my rural constituency?

[Mr Osborne]

The constituency of Wealden is dear to my heart, as my father grew up in Framfield, near the town of Uckfield, and I have been to see the area.

My hon. Friend is right that the support we are giving East Sussex in this statement is really compelling. It means that we can support the schools in her constituency, of which she has been such a strong champion.

[Greg Mulholland (Leeds North West) (LD)]

Following England’s series win against New Zealand, I am delighted that the Government are supporting the bid for the 2021 rugby league world cup. Last time there were huge problems on the trains, so will he bring forward plans to electrify the TransPennine line and the Leeds, Harrogate and York line which are so important to his northern powerhouse?

[Mr Osborne]

I am glad that the hon. Gentleman has noticed the bid that we have made for the rugby league world cup. Let us just hope that England, and indeed all the home teams, are a bit more successful than we were in the rugby union world cup.

The TransPennine train route is being electrified as fast as is possible in engineering terms. It is not a question of money—we have said that we will spend the money required for the electrification. The timetable is simply being dictated by what is possible in the engineering. I am therefore confident that we are making progress as fast as we possibly can.

[Callum McCaig (Aberdeen South) (SNP)]

The Chancellor seems to find the fall in the oil price somewhat amusing, whereas in the real world it means job losses and companies going to the wall. When will he stop laughing and start delivering the support for exploration that the industry requires?

--- Later in debate ---

[Mr Osborne]

It is now SNP policy that it wants a higher oil price, so presumably all the motorists would have to pay more for their car journeys in SNP Members’ constituencies and all the non-oil businesses would have to pay more as well. The truth is that not even the Scottish nationalist party is in control of the world oil price. It changes, and we have to ensure that that brilliant industry in the North sea is supported through the ups and downs of the world oil price cycle.

We have made huge cuts to North sea oil taxation this year and provided additional support for exploration. We have stepped in, with the industry, to create the Oil and Gas Authority for the UK and make sure it does everything it can so that we get every drop of oil we can out of the North sea, and indeed get the gas out too. I would have thought the hon. Gentleman wanted to work with us to make that possible. Of course, that kind of support would never be possible if Scotland were independent.

[Mr Speaker]

Last but never least, Mr Jim Shannon.

[Jim Shannon (Strangford) (DUP)]

Thank you, Mr Speaker. It is always a pleasure to speak in the House. I thank the Chancellor for the good things that he is doing for Northern Ireland, which have been confirmed today. Other Members have spoken about them.

Next Tuesday will be World AIDS Day. The latest figures for the United Kingdom show a rise in HIV and sexually transmitted diseases. In the news today, the talk was that many clinics where diagnosis of sexually transmitted infections takes place would have their funding reduced. Can the Chancellor confirm that the extra moneys set aside for health will ensure that those clinics remain open so that STIs can be diagnosed at an early stage?

[Mr Osborne]

The hon. Gentleman is right to draw attention to World AIDS Day, and to the fact that we are funding the national health service and so can support screening for and research into sexually transmitted disease and provide support for people with HIV/AIDS. We have included in our announcements this week the £1 billion Ross fund, named after Ronald Ross, a Nobel laureate of this country. That will go towards disease research, which could well include the disease that the hon. Gentleman mentions.

[Mr Speaker]

I thank the Chancellor, the shadow Chancellor and all colleagues. Three hours and 10 minutes later, subject to their other commitments, they can have a cup of tea.

Royal Assent