George Osborne has presented parliament with the government’s spending review for the next five years.
While the Chancellor’s U-turn on tax credit policy, as well as the unexpected safeguarding of police budget have made the biggest headlines, the Review establishes important changes to other areas of the budget such as central and local government, the NHS and business. Here are some of the key points:
Economic Forecast
In the speech before the Commons, Osborne revealed that the forecast for debt over the course of parliament has been revised downwards, saving the government £27bn and decreasing the amount borrowed by £8bn.
The extra savings will come from growing tax receipts and lower debt interest payments.
In total, borrowing this year will amount to £73.5bn. The forecast predicts that by 2019/2020 the deficit will turn into a £10.1bn surplus.
GDP growth is expected to stay at 2.4% this year, as well as the next.
Central and Local Government
The Review establishes changes to local government funding arrangements by allowing councils to keep 100% of revenues from council-owned property sales, as well as 100% of receipts from business rates by 2020.
Total government spending is expected to drop to 36.5% of national income from the current 40%.
NHS
The health service budget will increase by nearly £20bn until the end of this parliament, reaching £120bn by 2020/2021. According to the chancellor, the extra money will enable £5bn extra spent on research, 800,000 more elective hospital admissions, £5m more spent on outpatient appointments and £2m on diagnostic tests.
Tax Evasion
The Spending Review sets in place new and harsher penalties for tax abuse, as well as action on disguised remuneration schemes and stamp duty avoidance.
The chancellor expects that an additional £800m injected in the fight against tax evasion will enable proceeds of up to ten times the amount on extra tax receipts collected.
Osborne has also announced plans for a digital platform that would enable users to manage their taxes online. The platform is directed at both individuals and small businesses, and is expected to be up and running by 2019.
Business
The Department of Business budget will be cut by 17% but science budget will rise to £4.7bn.
Osborne also revealed plans to extend the small business rate relief scheme to 600,000 companies and create 26 new enterprise zones.
Business taxation rates will no longer be uniform and will instead be decided by individual councils and elected mayors, who are able to both cut and raise rates at their own discretion.
Finally, an apprenticeship tax of 0.5% will be levied on the employer’s wage bill. The new tax is designed to raise £3bn extra in revenues a year to fund three million apprenticeships.
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Related: NHS England secures £3.8.bn increase in funding for 2016/2017