However, it remains to be seen how this change will impact on the Fresh Start agreement which included money for those who would have lost out on tax credits.
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His words echoed those of shadow chancellor John McDonnell, who said: “I’m glad [Mr Osborne] has listened to Labour and seen sense”.
“From what we have heard today, I think they will feel absolutely betrayed”.
The highly respected Institute for Fiscal Studies stressed that the era of austerity was far from over, with more painful cuts, including on welfare and in Whitehall, to come.
According to the chancellor, the extra funding would further support integration between health and social care, and mean that social care spending will have “risen in real terms” by 2020.
“Above all, we want to protect the people of London and make this the safest global city”.
The Government had faced pressure from senior police officers over budget cuts, especially in the wake of the Paris terror attacks.
He proposals had attracted widespread criticism, including from fellow Tory MPs, before being defeated in the House of Lords.
“Osborne’s U-turn on his plans to scrap tax credits is to be welcomed but it should never have been on the table in the first place”.
Earlier this year Osborne called the overhaul a “devolution revolution” and said it is the “biggest transfer of power to our local government in living memory”.
However, the think-tank emphasised that the coming spending period would still be one of the tightest in post-war history, with low-income families and poorer councils standing to lose the most. The Office for Budget Responsibility, an independent agency, estimated that public finances would be $40 billion better off than it had forecast in July.
However Labour say that £1bn is still being taken from working families next year, and over £3bn will be taken by the next Parliament – something the Treasury disputes. The Chancellor confirmed plans to double the housing budget with spending partly funded by new rates of Stamp Duty that will be 3pc higher on the purchase of additional properties like buy-to-lets and second homes. Wider benefit and wider tax credits cuts are still going to slash family incomes and drive up child poverty.
He added: “It will only damage this Parliament’s ability to grow our economy and deliver services”.
However, the maximum parents can claim through the tax credit scheme remains the same.
Mr Osborne promised to stick to his overall financial targets, and he said that £27 billion (S$57 billion) from strong tax receipts, and low borrowing costs would help the country avoid cutting front-line services like the police.
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There were “still some very significant cuts ahead”, with day-to-day spending in Whitehall departments – with the exception of protected areas like the NHS, aid, defence and schools – falling by 18% by 2019/20.
