Spending Review: Osborne sets out plan to put Britain in the black

The Chancellor used a £27 billion windfall from better than expected tax receipts and lower interest costs to head off two major political headaches.

Controversial changes to tax credits which had come under fire from Conservative backbenchers were scrapped and police funding. expected to be in the firing line today, was left untouched.

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Mr Osborne also committed the Government to infrastructure investment including a major increase on transport projects in the North and flood defences.

The Chancellor told MPs his spending plans would deliver a £10 billion surplus by the next General Election “so we don’t borrow forever and are ready for whatever storms lie ahead”.

“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,” he said.

The Chancellor tried to inject momentum into his “northern powerhouse” vision with measures including a new £400m investment fund and three new enterprise zones in Yorkshire.

He delivered on his promise to protect schools, defence, the NHS and international development from the axe.

But while Mr Osborne said he was able to “smooth” the path of cutbacks he nevertheless unveiled major cuts in the day-to-day budgets of unprotected departments prompting warnings of major damage to public services.

Defending the cuts, the Chancellor said they were necessary to necessary to “build this country’s future” and in a swipe at Labour claimed they showed the Government was “the mainstream representatives of the working people of Britain”.

Shadow Chancellor John McDonnell branded Mr Osborne’s U-turn on tax-credits a fiasco and warned the plan to replace them with universal credit would still hurt families.

And he said the public would not believe Mr Osborne’s promise to put Britain back in the black.

“Over the last five years there has barely been a target the Chancellor has set he hasn’t missed or hasn’t ignored,” he said.

Tonight, the Government was accused of trying to bury bad news as it published a report into Network Rail’s finances

It will sell off assets worth £1.8 billion to fund projects including electrification of the Midland Mainline and Trans-Pennine routes.