Chancellor George Osborne promised a “recovery for all” as he announced a boost for jobless youngsters seeking work.
Delivering his annual Autumn Statement, he seized on the improving economic outlook to declare that he was scrapping employers’ national insurance contributions for the under 21s.
“We’re not going to leave young people behind as the economy grows. We are going to have a responsible recovery for all.”
He said the national insurance “jobs tax” for 1.5 million workers under 21 would be scrapped.
But he also warned that those same young people would have to work longer as he confirmed that the state pension age would rise to 68 in the mid 2030s and 69 in the late 2040s.
The announcement has already drawn criticism with unions claiming that Britons were being expected to work “until they drop”.
The Chancellor declared that “Britain’s economic plan is working” but as he outlined plans to extend the retirement age for millions, he warned that the “job is not yet done”.
He spoke of “more difficult decisions” and acknowledged that the effects of the economic crash on family budgets were still being felt.
But he pledged: “The hard work of the British people is paying off and we will not squander their efforts.”
He revealed that the recession had been even deeper than feared - with GDP down by 7.2% rather than 6.3% - the equivalent of £3,000 per household and one of the sharpest falls globally.
But he said that UK plc was now growing faster than any other advanced economy.
He sat down to Tory cheers declaring: “Britain’s moving again; let’s keep going.”
But shadow chancellor Ed Balls accused Mr Osborne of being in “complete denial”. He said living standards for families were falling “year on year on year”.
Mr Osborne said the improving economic outlook meant borrowing would be £111 billion this year - £9 billion less than predicted at the time of the Budget in March.
Overall the Office for Budget Responsibility is now forecasting that borrowing over the next five years would be £73 billion less than previously thought with a “small cash surplus” by 2018/2019.
The Chancellor said the economy was expected to bounce back strongly with the OBR forecasting growth this year of 1.4% - more than double the forecast at the time of the Budget in March.
Mr Osborne announced a new cap from next year on welfare spending but said that state pensions would be excluded.
He also promised a further £3 billion in savings in the public sector but said the NHS would be excluded.
He announced £1 billion in loans to unblock housing developments in Manchester, Leeds and elsewhere.
He also confirmed that funding would be made available for a programme to upgrade school kitchens.
The issue was the subject of an extraordinary coalition row between Deputy Prime Minister Nick Clegg and the Conservative Education Secretary Michael Gove when furious Lib Dem sources accused Mr Gove’s officials of “lying” and “talking bollocks” when they warned they may have to raid the Department for Education’s basic needs budget to pay for the upgrade.
He confirmed that job seekers aged 18 to 21 without basic maths or English would be required to undertake training in these skills or lose their benefits, and to start a traineeship, work experience or community work after six months or face the same sanction.
He announced an additional 30,000 student places next year, with the cap on student numbers abolished altogether in 2015.
The Chancellor confirmed the widely-trailed cap in increases in business rates at 2% from April 2014.
He also said £1,000 would be knocked off the bill for small businesses in the UK’s High Streets.
He said fuel duty would be frozen again next year and claimed that the Government had knocked £11 off a tank full of fuel through its restrictions on the levy, which was designed to increase every year.
As expected he gave married couples a boost by bringing in a £1,000 tax allowance transfer.
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