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Britain drops controversial plan to cut tax credits for the working poor

The UK is set to cut spending on social care, renewable energy and local government, finance minister George Osborne has announced. In a surprising move, the government gave up on cutting tax credits that help the poor.

The conservative government has decided to drop the cuts to the tax credit system due to higher tax receipts and lower interest rates, Chancellor of the Exchequer George Osborne told the British parliament on Wednesday.

The government-proposed cuts had sparked heavy criticism, as tax credits supplement the income of parents and

low-income workers.

"I've listened to the concerns. I hear and understand them," Osborne said while explaining his budget plan. "And because I've been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether."

The proposed reform, aiming to save 4.4 billion pounds ($6.65 billion), was blocked earlier this month in the upper house of British parliament, the House of Lords. This caused some consternation, however, as the Lords typically refrain from vetoing financial laws, leaving spending policy to elected parliamentarians.

After the bill was thrown back, many expected that Osborne would simply water down the reform instead of abandoning it all together.

Security forces safe from cuts

Osborne also announced there would be no

cuts to the UK police force,

citing recent Paris attacks during the six-monthly budget update.

"Now is not the time for further police cuts. Now is the time to back our police and give them the tools," he said.

Defense spending, health care and schools are also to be safe from the cuts.

Despite the changes in the budget plan, the finance minister vowed to stick to his earlier pledge of saving 12 billion pounds in welfare during the next five years.

'Tampon tax' will go to charity

The chancellor also used his speech to address the controversial 'tampon tax' that is, taxing tampons with VAT (sometimes called sales tax) for what are considered luxury items. Some 300,000 people in Britain signed a petition against the tax, arguing that the products are hygiene necessities, not luxuries.

The government had already said that it was charging the lowest tax rate allowed by European law, 5 percent, on womens' sanitary products.

Osborne said in his speech that there was nothing he could do about the tax at this time, but insisted the revenue from the tax would be diverted to womens' charities.

"The first £5 million will be distributed between the Eve Appeal, Safe Lives and Women's Aid and The Haven - and I invite bids from other such good causes," Osborne told the House of Commons. The first two are organizations for cancer patients and the latter two focus on domestic violence.

Fighting the housing crisis

At the same time, Osborne said that the government would build 400,000 "affordable" homes in the "biggest house-building by any government since 1970s."

"Our job is to rebuild Britain ... so that Britain becomes the most prosperous and secure of all the nations in the world," said Osborne, who is widely seen as a potential successor to the current prime minister David Cameron - along with London Mayor Boris Johnson and Interior Minister Theresa May.

The authorities intend to build some of the homes on the land left over after closing of prisons, such as Holloway women's prison in north London. The British capital is one of the most expensive cities in the world when it comes to property prices.

The

conservative government

aims to run a budget surplus by 2020.

dj,es/msh (AFP, Reuters, AP)

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