Osborne targets welfare recipients and teachers

Welfare benefits are to be squeezed, teachers forced to accept performance-related pay and half a million people will be dragged into the higher tax bracket under tax and spending changes announced in London yesterday.

Welfare benefits will rise by just 1 per cent for each of the next three years, while housing and child benefits will rise by the same for two years, said chancellor of the exchequer George Osborne. He added that those on benefits could not be immune from pain.

Earnings versus welfare

Average earnings have risen by 10 per cent since 2007, while “out-of-work benefits” have increased by 20 per cent, he told MPs. “That’s not fair to working people who pay the taxes that fund them,” he said, in a move that will put pressure on Labour.

Telling the UK it will take eight years to balance the finances, Mr Osborne conceded that debt figures as a percentage of gross domestic product will not have fallen by the next general election – one of his key ambitions up to now.

Pledging to cut corporation tax to 21 per cent by 2014, Mr Osborne said it would offer the lowest rate for any major economy, though revenue and customs will be given extra money to root out tax abuses.

Borrowing will fall from £108 billion this year to £99 billion next year, then to £88 billion and down to £73 billion in 2015-2016. By 2017-2018, it will have fallen to £31 billion, he told the Commons as he delivered his autumn statement.

Angry motorists

In a bid to fend off motorists’ fury about petrol prices, the chancellor scrapped a 3p-a-litre duty rise due in January – a move that will cost the treasury £1.5 billion in tax forgone, while the lowest-paid will earn nearly £9,500 before paying any tax.

Better-off people will get tax relief on pension contributions up to £40,000 a year, which should cover 99 per cent of all those saving for pensions.

Fears that civil servants working outside London were to face pay cuts under regional pay rules turned out to be groundless, but teachers will not get annual increments unless they pass annual appraisals, Mr Osborne said.

The Association of Teachers and Lecturers accused Mr Osborne and education secretary Michael Gove of presiding over “a disaster” for education.