(Original script, may differ
from delivered version)
Location: House of Commons
Mr Speaker, 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.
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.
The strong country we want to build.
Five years ago, when I presented our first Spending Review,
our economy was in crisis and there was no money left.
We were borrowing one pound in every four we spent. Our job
then was to rescue Britain.
Today, as we present this Spending Review, our job is to
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 we leave to the next generation a stronger country than
the one we inherited.
That is what the government was elected to do – and today we set out
the plan to deliver on that commitment.
Mr Speaker, 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 we don’t 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 new 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
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 we truly extend
opportunity to all;
Whether it’s 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 the way we hand back power to local communities.
This is a big Spending Review by a government that does big
things. It’s a long-term economic plan for our country’s future.
Mr Speaker, nothing is possible without the foundations of a
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 has been published
which confirm this: Since 2010, no economy in the G7 has grown faster
We’ve grown almost three times faster than Japan, twice as
fast as France, faster than Germany and at the same rate as the United
And 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’re determined that this will be an economic recovery
for all, felt in all parts of our nation. 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.
And where do we have the highest employment rate of any part
of our country? In the South West.
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
And I can tell the House that in today’s forecast, the
expectations for world growth and world trade have been revised down
The weakness of the Eurozone remains a persistent problem;
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.
And that growth, Mr Speaker, is more balanced than in the
past; whole economy investment is set to grow faster in Britain than in
any other major advanced economy – this year, the next year, and the
year after that.
Mr Speaker, 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 that inequality would rise.
Every single one of those predictions have proved to be
So too did the claim that Britain had to choose between sound
public finances and great public services.
It’s a false choice; if you are bold with your reforms you can
That’s why, while we’ve 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.
And yet now, the same people are making similar claims about
this Spending Review, as we seek to move Britain out of deficit into
And they are completely wrong again.
The OBR has seen our public expenditure plans and analysed
their effect on our economy. Their 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
That’s 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 we’re prepared for the inevitable storms that lie ahead.
That’s 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.
Mr Speaker, that brings me to the forecasts for debt and
As usual, the OBR has had access to both published and
unpublished data, and has made its own assessment of our public
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 onto 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 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, they forecast 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% and then 74.3%, reaching 71.3% in
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.
Second, 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 calculate it means a £27 billion
improvement in our public finances over the forecast period, compared
to where we were at the Budget.
Mr Speaker, 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.
Second, we will spend £12 billion more on capital investments
- making faster progress to building the infrastructure our country
And third, 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.
And that means we can help on tax credits.
I’ve been asked to help in the transition as Britain moves to
the higher wage, lower welfare, lower tax society the country wants to
I’ve had representations that these changes to tax credits
should be phased in. I’ve listened to the concerns. I hear and
And because I’ve been able to announce today an improvement in
the public finances, the simplest thing to do is not to phase these
changes in, but to avoid them altogether.
Tax credits are being phased out anyway as we introduce
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 meet the cap in the later part of the Parliament.
Indeed, on the figures published today, we will still achieve
the £12bn per year of welfare savings we promised.
That’s because of the permanent savings we have already made
and further long term reforms 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 paid to those in the private rented sector who receive the
This will apply to new tenancies only.
We’ll also stop paying housing benefit and pension credit
payments to people who’ve 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 too.
So 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 the deficit and for borrowing.
In 2010, the deficit we inherited was estimated to be 11.1% of
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
Then the deficit is down again to 1.2% in 2017-18, 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, they now forecast we will borrow less than that at
Borrowing then falls to £49.9 billion next year.
Borrowing then continues to fall, and falls to lower than was
forecast at the Budget in every single year after that.
To £24.8 billion in 2017-18; down to just £4.6 billion in
In 2019-20, we reach a surplus.
A surplus of £10.1 billion. That’s higher than was forecast at
the Budget. Britain out of the red and into the black.
In 2020-21 the surplus rises to £14.7 billion the year after
So Mr Speaker, The deficit falls every year.
The debt share is lower in every year than previously forecast.
We’re borrowing £8 billion less than we expected overall.
And we reach a bigger surplus.
We’ve 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. Mr Speaker, that brings me to our plans
for public expenditure and taxation.
I want to thank my Right Honourable Friend the Chief
Secretary, our Ministerial colleagues, and the brilliant officials
who’ve assisted us, for the long hours and hard work 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.
Today we go further with new penalties for the General
Anti-Abuse Rule we introduced, 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
HMRC is making savings of 18% in its own budget through
efficiencies – in the digital age, we don’t need taxpayers to pay for
paper processing, or 170 separate tax offices around the country.
Instead, we’re reinvesting some of those savings with an extra
£800 million in the fight against tax evasion – an investment with a
return of almost ten times in additional tax collected.
We’re going to build one of the most digitally advanced tax
administrations in the world. 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 those accounts are up and running, we’ll
require capital gains tax to be paid within 30 days of completion of
any disposal of residential property.
Together these form part of the digital revolution we’re
bringing to Whitehall with this Spending Review.
The Government Digital Service will receive an additional
£450m, 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 £1.9bn.
These form part of the £12bn of savings to government
departments I am announcing today.
In 2010, government spending took up 45% of national income.
This was a figure we couldn’t 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 set to reach 36.5% by the end of the Spending Review.
The structural spending that this represents is at a level
that a competitive, modern, developed economy can sustain.
And it’s a level the British people are prepared to pay their
It is precisely because this Government believes 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 Mr Speaker, I am setting the limits for total managed
expenditure as follows.
This year public spending will be £756bn.
Then £773bn next year, £787bn the year after, then £801bn,
before reaching £821bn in 2019-20, the year we’re 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 £857bn in 2020-21.
Mr Speaker, 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.
Mr Speaker, people will want to know what the levels of public
spending mean in practice, and the scale of the cuts we’re asking
government departments to undertake.
Over this Spending Review the day–to-day spending of
government departments is set to fall by an average of 0.8% a year in
That compares to an average fall of 2% over the last five
So the savings we need are considerably smaller.
This reflects the improvement in the public finances and the
progress we’ve already made – indeed, the overall rate of annual cuts I
set out in today’s Spending Review are less than half of those
delivered over the last five years.
So Britain spending a lower proportion of its money on welfare
and a higher proportion on infrastructure.
The Budget balanced, with cuts half what they were in the last
Making the savings we need – no less and no more.
And providing the economic security to working people of a
country with a surplus that lives within its means.
This does not, of course, mean 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’s 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.
Second - to spread economic power and wealth through a
devolution revolution and invest in our long term infrastructure.
Third – to extend opportunity by tackling the big social
failures that for too long have held people back in our country.
Fourth – 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 in Wales. But we have been increasing
spending on the NHS in England.
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
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’ll replace direct funding with loans for new students –
so 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
We made a commitment to a £10bn real increase in the health
And we fully deliver that today, with the first £6bn 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 £120bn by
This is a half a trillion pound commitment to the NHS over
this Parliament – the largest investment in the health service since
So we have a clear plan for improving the NHS. We’ve fully
funded it. And in return patients will see more than £5 billion of
health research, in everything from genomes to anti-microbial
resistance to 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
outpatient appointments, 2 million more diagnostic tests.
New hospitals funded in Cambridge, in Sandwell and in
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’s mental health.
I want to thank the All Party Group, led by my Right
Honourable Friend for Sutton Coldfield, the Right Honourable Friend for
North Norfolk and Alastair Campbell, for their 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 £600m 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
Mr Speaker, the health service cannot function effectively
without good social care.
The truth we need to confront is this: many local authorities
are not going to 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 who 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’s part of the major reform we’re undertaking to integrate
health and social care by the end of this decade.
To help achieve that I am today increasing the Better Care
Fund to support that integration, with local authorities able to access
an extra £1.5bn 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.
Mr Speaker, a civilised and prosperous society like ours
should support its most vulnerable and elderly citizens.
That includes a decent income in retirement. Over 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 this important
boost to our nation’s savings, we’ll 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 do Britain’s pensioners receive a
derisory increase of 75 pence.
As a result of our commitment to those who’ve 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’s the biggest real terms increase to the basic State
Pension in 15 years.
Taking all of our increases together, over the last 5 years,
pensioners will be £1,125 better off a year than they were when we came
We’re also undertaking the biggest change in the state pension
for forty years to make it simpler and fairer, by introducing the new
single tier pension for new pensioners from April next year.
I am today setting the full rate for our new state pension at
That’s higher than the current means-tested benefit for the
lowest income pensioners in our society – and another example of
progressive government in action.
And instead of cutting the Savings Credit, as in previous
fiscal events, it will be instead 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
In recent weeks, great metropolitan areas like 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
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 rewards that come when you do so. So I can confirm
today that, as we set out last month, we will abolish the uniform
By the end of the parliament local government will keep all of
the revenue from business rates.
We’ll 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’re used to fund specific infrastructure projects supported by the
local business community.
Because 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
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 £10m
a year more, upfront, so they can provide more help to homeless people.
Alongside savings in the public health grant we’ll consult on
transferring new powers and the responsibility for its funding, and
elements of the administration of housing benefit. Local government is
sitting on property worth quarter of a trillion pounds.
So we’re going to 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’ll encourage them to draw on these reserves as
they undertake reforms.
Mr Speaker, this amounts to a big package of new powers, but
also new responsibilities for local councils.
It’s a revolution in the way we govern this country.
And if you take into account both the fall in grant and the
rise in council incomes, it means that by the end of this Parliament
local government will be spending the same in cash terms as it does
Mr Speaker, the devolved administrations of the United Kingdom
will also have available to them unprecedented new powers to drive
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 the rate of
That’s 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 to allow us to move forward.
So Northern Ireland’s block grant will be over £11 billion by
2019-20 – and funding for capital investment in new infrastructure will
rise by over £600m over 5 years, ensuring Northern Ireland can invest
in its long term future.
For years Wales has asked for a funding floor to protect
public spending there. Now, within months of coming to office, this
Conservative Government is 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 Honourable
Friend the Welsh Secretary and I also confirm that we will legislate so
that the devolution of income tax can take place without a referendum.
We’ll also help 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 over £900m over 5
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’s have a deal that’s fair to Scotland, fair to the UK and
that’s built to last. We’re implementing the city deal with Glasgow,
and negotiating deals for Aberdeen and Inverness too.
Of course, if Scotland had voted for independence, they would
have had their 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 over £30 billion in
2019-20 – while capital spending available will rise by £1.9 billion
through to 2021.
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.
Mr Speaker, we’re devolving power across our country, and
we’re also spending on the economic infrastructure that connects our
That’s something Britain hasn’t 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 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
But transport capital spending will increase by 50% to a total
of £61 billion - the biggest increase in a generation. That funds the
largest road investment programme since the 1970s. For we are the
It means the construction of HS2 to link the Northern
Powerhouse to the South can begin. The electrification of lines like
the Trans-Pennine, Midland Main Line and Great Western can go ahead.
We’ll fund our new Transport for the North to get it up and
London will get an £11 billion investment in its transport
And having met with my Honourable Friend for Folkestone 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
We’re making the £300 million commitment to cycling we
And we will be spending over £5 billion on roads maintenance
this Parliament, and thanks to the incessant lobbying of my Honourable
Friend for Northampton North, Britain now has a permanent pothole fund.
We’re investing in the transport we need; and in the flood
DEFRA’s day to day budget falls by 15% in this Spending
Review, but we’re committing over £2 billion to protect 300,000 homes
Our commitment to farming and the countryside is reflected in
the protection of funding for our national parks and for our forests.
We’re not making that mistake again and I can tell the House
that 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 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’re doubling our spending on energy research with a major
commitment to small modular nuclear reactors.
We’re also supporting the creation of the shale gas industry
by ensuring that communities benefit from a Shale Wealth Fund, which
could be worth up to £1bn.
Support for low-carbon electricity and renewables will more
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, we are
increasing our support for climate finance by 50% over the next five
DECC’s day to day resource budget will fall by 22%.
We will reform the Renewable Heat Incentive to save £700
We’re going to permanently exempt our Energy Intensive
Industries like steel and chemicals from the cost of environmental
tariffs, so we keep their bills down, keep them competitive and keep
I can announce we’re introducing a cheaper domestic energy
efficiency scheme that replaces ECO.
Britain’s new energy scheme will save an average of £30 a year
from the energy bills of 24 million households.
Because the Government believes that going green should not
cost the earth and we’re cutting other bills too. We’re going to bring
forward reforms to the compensation culture around minor motor accident
This will remove over £1bn from the cost of providing motor
insurance. We expect the industry to pass on this saving, so motorists
see an average saving of £40-50 per year off their insurance bills.
Mr Speaker, this is a Government that backs all our
businesses, large and small. We understand there is no growth and no
jobs without a vibrant private sector and successful entrepreneurs. So
this spending review delivers what businesses need.
Businesses need competitive taxes.
I’ve already announced a reduction in our corporation tax rate
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
We commit to the same level of support for our aerospace and
automotive industries. Not just for the next five years but for the
Spending on our new catapult centres will increase.
And we’ll 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
It’s one of the savings that helps us reduce the BIS budget by
In the modern world one of the best ways you can back business
is by backing science. That’s why in the last Parliament, I protected
the resource budget for science in cash terms. In this Parliament I’m
protecting it in real terms so it rises to £4.7bn.
That’s £500 million more by the end of the decade. Alongside
£6.9bn in the capital budget too.
We’re funding the new Royce Institute in Manchester, and new
agri-tech centres in Shropshire, York, Bedfordshire and Edinburgh.
And we’re going to 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’ve 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 published
this week – and we will implement its recommendations.
Britain’s not just brilliant at science. It’s brilliant at
One of the best investments we can make as a nation is in our
extraordinary arts, museums, heritage, media and sport.
£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 of Culture, Media and Sport are a false
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’ll keep free museum entry – and look at a new tax credit to
support their exhibitions and I will help UK Sport, which has been
living on diminishing reserves, with a 29% increase in their budget –
we’re going for gold in Rio and Tokyo.
The Right Honourable Member for Hull West and Hessle has
personally asked me to support his city’s year of culture – and I am
happy to do so.
The money for Hull is all part of a package for the Northern
Powerhouse which 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’ll help the British Museum, the
Science Museum, and the V&A move their collections out of
storage and on display.
And we will fund the exciting plans for a major new home for
the Royal College of Arts in Battersea.
And we’re increasing the funding for the BBC World Service, so
British values of freedom and free expression are heard around the
And all of this can be achieved 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
There are many great charities that work to support vulnerable
And my Honourable Friend, the new Member for Colchester, has
proposed to me a brilliant way to give them more help.
300,000 people have signed a petition arguing that no VAT
should be charged on sanitary products. We already charge the lowest 5%
rate allowable under European law and we’re committed to getting the EU
Until that happens, I’m going to 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 and Women’s Aid, and The Haven – and I invite bids
from other such good causes.
It’s similar to the way we use LIBOR fines – and today I make
further awards from them too. We’ll support a host of military
charities, from Guide Dogs for Military Veterans to Care After Combat.
We’ll renovate our military museums – from the Royal Marines
and D-Day Museums in Portsmouth, to the National Army Museum, to Hooton
Park aerodrome, and the former HQ of RAF Fighter Command at Bentley
In the Budget I funded one campaign bunker, since then more
have emerged and at the suggestion of my Right Honourable Friend for
Mid Sussex, we 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’ll contribute to a
memorial to those victims of terrorism who died on the bus in Tavistock
Square ten years ago.
It’s a reminder that we’ve always faced threats to our way of
life, and have never allowed them to defeat us.
We deliver security so we can spread opportunity, and that, Mr
Speaker, 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
That’s 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.
Mr Speaker, 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’s 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 3 and 4 year olds.
We’ll support £10,000 of childcare costs tax-free.
To make this affordable this extra support will now only be
available 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 2 year olds.
And to support nurseries delivering more free places for parents, we’ll
increase the funding for the sector by £300 million.
Taken together that’s a £6 billion childcare commitment to the
working families of Britain.
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
We will maintain the current national base rate of funding for
our 16-19 year old students for the whole Parliament.
We’re going to open 500 new Free Schools and University
Invest £23 billion in school buildings and 600,000 new school
And to help all our children make the transition to adulthood
– and learn about their responsibilities to society and not just their
rights – 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 Honourable Friend the
Five years ago 200 schools were Academies. Today 5,000 schools
Our goal is to complete this schools revolution – and help
every secondary school become an Academy.
And I can announce that we will let Sixth Form Colleges become
Academies too – so they no longer have to pay VAT.
We will make local authorities running schools a thing of the
past. This will help save around £600m on the Education Services Grant.
Mr Speaker, 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.
And that’s 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
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 be start to be introduced from 2017 – and my
Right Honourable Friend the Education Secretary will consult in the new
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.
In the Budget I announced that we would replace unaffordable
student maintenance grants with larger student loans.
That saves us over £2bn a year in this Spending Review.
And it means we can extend support to students who’ve 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’ll also, for the first time, provide tuition fee loans for
those studying higher skills in FE – and extend loans to all
Almost 250,000 extra students will benefit from all this new
support I am announcing today and then there’s 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.
And to make sure they are high quality apprenticeships, we’ll
increase the funding per place - and my Right Honourable Friend the
Business Secretary will create a new business-led body to set standards.
As a result, we will be spending twice as much on
apprenticeships by 2020 compared to when we came to office.
To ensure 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 paybill.
Every employer will receive a £15,000 allowance to offset
against the levy – which means over 98% of all employers - and all
businesses with paybills of less than £3 million - will pay no levy at
Britain’s apprenticeship levy will raise £3bn a year. It will
fund 3 million apprenticeships. With those paying it able to get out
more than they put in.
It’s a huge reform to raise the skills of the nation and
address one of the enduring weaknesses of the British economy.
Mr Speaker, education and skills are the foundation of
opportunity in our country. Next we need to help people find work.
The number claiming unemployment benefits has fallen to just
2.3%, the lowest rate since 1975.
But we’re not satisfied that the job is done. We want to see
So today we confirm we’ll extend the same support and
conditionality we currently expect of those on JSA to over 1 million
more benefit claimants.
Those signing on will have to attend the job centre every week
for the first three months.
And we’ll increase in real terms the help we provide to people with
disabilities to get 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 their estate and co-locating job centres with
local authority buildings.
It’s the way to save money while improving the frontline
service we offer people – and providing more support for those who are
most vulnerable and in need of our help.
Mr Speaker, you can’t say you’re fearlessly tackling the most
difficult social problems if you turn a blind eye to what goes on in
our prisons and criminal justice system.
My Right Honourable 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 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 a billion pounds in this Parliament building 9 new modern prisons.
Today, the transformation gets underway with the announcement
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.
Mr Speaker, 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.
And 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. 15
years ago, around 60% of people under 35 owned their own home, next
year it’s set to be just half of that.
We made a start on tackling this in the last Parliament, and
with schemes like our Help to Buy the number of first time buyers rose
by nearly 60%. But we haven’t done nearly enough yet.
So it’s 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. Yes, doubling it to
over £2 billion per year. We will deliver, with government help,
400,000 affordable new homes by the end of the decade.
And affordable means not just affordable to rent, but
affordable to buy.
That’s 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.
135,000 will be our brand new Help to Buy: Shared Ownership
which we announce today. We’ll 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 this starts with a new pilot.
From midnight tonight, tenants of 5 housing associations will
be able to start the process of buying their own home.
The third element of the plan involves accelerating housing
We are announcing further reforms to our planning system so it
delivers more homes more quickly.
We’re releasing public land suitable for 160,000 homes and
re-designating unused commercial land for Starter Homes.
We’ll 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.
Fourth, 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 Honourable Friend for Richmond Park has been campaigning on
affordable home ownership in London. Today we back him all the way.
And 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 aren’t affected by the
restrictions I introduced in the Budget on mortgage interest relief;
and many of them are bought by those who aren’t resident in this
Frankly, people buying a home to let should not be squeezing
out families who can’t afford a home to buy.
So I am introducing new rates of Stamp Duty that will be 3 per
cent higher on the purchase of additional properties like buy-to-lets
and second homes.
It will be introduced from April next year and we’ll consult
on the details so that corporate property development isn’t affected.
This extra stamp duty raises almost a billion pounds by 2021 –
and we’ll 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 building the new homes. So this
Spending Review delivers:
A doubling of the housing budget.
400,000 new homes; with extra support for London.
Right to Buy rolled-out.
Paid for by a tax on buy-to-lets and second homes.
Delivered by a 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
£34bn today to £40bn.
Britain also commits to spend 0.7% of our national income on
overseas development – and we will re-orientate that budget, so 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 and we do so ably supported by my Right
Honourable Friend the Foreign Secretary and our outstanding diplomatic
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.
Mr Speaker, our police are on the front line 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 Honourable 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, and 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
And 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.
Mr Speaker, I’ve had representations police budgets should be
cut by up to 10%. But now is not the time for further police cuts.
Now is the time to back our police and give them the tools do
I am today announcing 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’re 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.
And 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.
Sometimes difficult, yes, but decisions that:
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
And build the strong public finances on which all of these
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.
The government; the mainstream representatives of the working
people of Britain.