Yesterday lunchtime, George Osborne delivered his Autumn Statement and Spending Review – the latter of which established the basis of government spending for the next five years.
The Chancellor’s hour-long address was marked by a number of shock announcements. Firstly, that he was scrapping the government’s proposed cuts to tax credits. Secondly, that the police budget would not be cut. And, thirdly, that he anticipated Britain would achieve a £10.1bn budget surplus by 2020/21 – a larger figure than previously predicted.
However, beneath the headlines, how will the Chancellor’s proposals affect you? We provide a summary of the key changes that will impact young people.
Under Osborne’s new rules, any graduate who started university in or after 2012 will now pay back an extra £2,800 on their student loan.
Those who started university in 2012 or later were sold a loan by the previous government. It was initially proposed that the threshold, or minimum yearly wage, that students had to meet before starting to pay back their loan was £21,000. That threshold was set to increase every year in line with average earnings.
However, in the small print of this year’s Autumn Statement, Osborne froze the threshold for five years, meaning it remains at £21,000. This change has been backdated to students who began their courses in 2012, many of whom graduated this summer. The extra loan payment will amount to an average of about £3,000, calculated the IFS.
Martin Lewis, the personal finance expert, criticised the move, arguing that it destroys trust in the student finance system. ‘It is one thing to set up a system that is unpopular but it is entirely different to make retrospective changes that mean you cannot even rely on what you were promised at the time you started to study’, Lewis said.
It is not beyond the realms of possibility for Osborne’s changes to face legal challenges, however. Martin Lewis added that ‘If a commercial company made retrospective changes to their loan terms in this way they’d be slapped hard by the regulator’.
Another big change to student finance included in the Autumn Statement will mean that student nurses will have their grants cut and will instead have to take out loans to cover their tuition fees. Student opportunity funds available for disadvantaged and disabled learners have also been reduced.
But, in the same breath, Osborne announced that the range of students eligible for larger student loans has increased to include mature postgraduates, part-time students, and students studying for a second degree.
First Time Buyers and Tenants
400,000 new affordable homes will be built by 2020 as part of Osborne’s plan to help first time buyers.
This includes 135,000 Help to Buy shared ownership houses – a scheme which allows first time buyers to acquire a share in part of their new home, and pay rent on the rest.
Osborne also introduced a special London Help to Buy scheme, which provides a loan to cover up to 40% of the property value for first time buyers in London, interest free for the first five years.
But it’s not good news for private tenants: Osborne has increased stamp duty by 3% for landlords who own buy-to-let homes. It is expected that the extra costs faced by landlords will be paid for by tenants, as landlords will seek to increase rent prices to offset the stamp duty rise.
The Autumn Statement included positive measures for school leavers who want to get an apprenticeship: Osborne has announced new funding to make sure an extra three million apprenticeships are created by 2020.
Businesses with a wage bill of more than £3 million will have a new apprenticeship levy of 0.5% imposed on their payrolls to pay for the new apprenticeships.
The new levy has been criticised by many, including the CBI, the Institute of Directors and EY, as an attack on businesses. Indeed, Chris Sanger, head of tax policy at EY, has argued that the promise of three million extra apprenticeships has merely been used by Osborne as a way of sugar-coating the new tax.
Osborne announced that his proposed cuts to tax credits - widely opposed changes rejected by the House of Lords, would not go ahead.
This is good news for young people living in low-income families, who will no longer have to face the consequences of this cut in April 2016.
However, the relief will be temporary. By 2018 all tax credits will be phased out and replaced with Universal Credit. The new Universal Credit is set to be much less generous than tax credits, and will represent a cut in the amount of benefits currently given to welfare claimants. Moreover, the policy has already been passed by Parliament, so there is no chance of another shock rejection of the bill by the House of Lords.