Autumn Statement verdict: Despite tax credits U-turn, Osborne still hits most vulnerable

Chancellor George Osborne's £12bn in welfare cuts will hit society's most vulnerable, despite his u-turn on tax credit cuts, according to Labour's former top economic adviser.

The big announcement from the Chancellor's Autumn Statement and Spending Review was that the chancellor was scrapping previous plans to introduce cuts to tax credits that would have cost families up to £1,350 ($2,036) each.

Karim Palant, Labour's former head of economic policy to previous shadow chancellor Ed Balls, told IBTimes UK that the climb-down while embarrassing was in the best interest for Osborne in the long term.

"Clearly there will be questions about his judgement about why he made the decision in July to cut tax credits. But in the end it's a better scenario for him than carrying out those cuts which would have directly affected about 3 million people hugely," Palant said.

Despite the u-turn, the chancellor still promised to deliver £12bn in welfare cuts in this parliament. With tax credits spared, the question remains as to where the axe will fall to achieve this. Palant believes the most vulnerable in society will continue to be targeted.

"He shown over the last four or five years that hitting some of the most vulnerable people, those in social housing or with disabilities, he can get away with that. The bedroom tax or the household benefit cap have both forced people to move out of London and pay significantly more of their income. There is obviously a limit to how far he can get away with that but he's calculated he can get away with that," he said.

Strain on the NHS

The chancellor also committed a £10bn increase in real terms for the NHS, with £6bn to come next year. He also announced loans for student nurses to create 10,000 training places.

"This is partly funded by cuts to the Department of Health budget which covers prevention and this will have a knock-on effect on the NHS," Palant noted.

"There's also been an absolutely enormous cut to local government funding, which is a shift from direct grant to local government to local government keeping business rates revenue which currently would go to the treasury. But this will have a widely different impact on different people, so areas of slow growth will be hit particularly hard.

"And it will mean social care is under huge funding pressure. He's announced councils can increase council tax by 2% to meet some of that shortfall, but in many areas that won't go anywhere near to meeting that shortfall.

"Social care in poorer areas will continue to be under massive pressure and this will put a strain on the NHS," he added.

Tampon tax

But the announcement that sparked the most commotion on social media afterwards was Osborne's statement that £15m raised from the hugely controversial tampon tax would be used to fund women's charities.

"I think he thought he was being clever by transferring the money to women's charities. The way he described it by comparing it to the Libor fines, but women buying sanitary products are not like bankers breaking the law. The government should be giving money to women charities, sexual health and domestic violence treatment from all taxpayers, not just women," Palant said. "I think it may end up backfiring on the chancellor," he added.