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HIGHLIGHTS-UK's Osborne surprises with budget plan, scraps tax credit cuts

LONDON, Nov 25 (Reuters) - British finance minister George Osborne has delivered a half-yearly budget update to parliament in which he slightly raised his budget surplus target for the end of the decade while abandoning a controversial plan to make big savings in one part of the welfare budget.

Following are excerpts from Osborne's speech:

GOVT TO MEET DEBT-TO-GDP TARGETS

"We promised to bring our debts down. Today, the forecast I present shows that after the longest period of rising debt in our modern history, this year our debt will fall and keep falling in every year that follows."

OBR'S DEBT FORECASTS

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"That brings me to the forecasts for debt and deficit. As usual, the OBR has had access to both published and unpublished data, and has made its own assessment of our public finances ... Debt was forecast in July to be 83.6 percent of national income this year. Now (NYSE: DNOW - news) , today, in this Autumn Statement, they forecast debt this year to be lower at 82.5 percent. It (Other OTC: ITGL - news) then falls every year, down to 81.7 percent next year, down to 79.9 percent in 2017-18, then down again to 77.3 percent and then 74.3 percent, reaching 71.3 percent in 2020-21. In every single year, the national debt as a share of national income is lower than when I presented the Budget four months ago."

BUDGET SURPLUS

"We have committed to running a surplus. Today, I can confirm that the four-year public spending plans that I set out are forecast to deliver that surplus, so we don't borrow forever and are ready for whatever storms lie ahead."

GOVT TO MEET TARGET OF FALLING DEBT-TO-GDP RATIO EVERY YEAR

"Our Charter for Budget Responsibility commits us to reducing the debt-to-GDP ratio in each and every year of this parliament, reaching a surplus in the year 2019-20, and keeping that surplus in normal times. I can confirm that the OBR has today certified that the economic plan we present delivers on our commitment."

12 BLN STG OF WELFARE SAVINGS

"I can tell the House (of Commons) that the 12 billion pounds of welfare savings we committed to at the election, will be delivered in full, and delivered in a way that helps families as we make the transition to our new National Living Wage."

OBR HAS REVISED DOWN WORLD GROWTH AND TRADE FORECASTS

"I can tell the House that in today's forecast, the expectations for world growth and world trade have been revised down again. The weakness of the euro zone remains a persistent problem; there are rising concerns about debt in emerging economies."

OBR'S LATEST GDP FORECASTS

"Even (Taiwan OTC: 6436.TWO - news) with the weaker global picture, our economy this year is predicted to grow by 2.4 percent, growth is then revised up from the Budget forecast in the next two years, to 2.4 percent in 2016 and 2.5 percent in 2017. It then starts to return to its long-term trend, with growth of 2.4 percent in 2018 and 2.3 percent in 2019 and 2020."

OUTRIGHT BUDGET SURPLUS IN 2019/20

"So let me give the OBR forecasts for the deficit and for borrowing ... In 2019-20, we reach a surplus."

DEFICIT FORECASTS

"In 2010, the deficit we inherited was estimated to be 11.1 percent of national income. This year it is set to be almost a third of that, 3.9 percent. Next (Other OTC: NXGPF - news) year it falls to less than a quarter of what we inherited, 2.5 percent. Then the deficit is down again to 1.2 percent in 2017-18, down to just 0.2 percent the year after that, before moving into a surplus of 0.5 percent of national income in 2019-20, rising to 0.6 percent the following year."

CHANGES TO PLANS ON TAX CREDITS

"I've been asked to help in the transition as Britain moves to the higher wage, lower welfare, lower tax society the country wants to see. I've had representations that these changes to tax credits should be phased in. I've listened to the concerns. I hear and understand them. 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. Tax credits are being phased out anyway as we introduce universal credit. What that means is that the tax credit taper rate and thresholds remain unchanged."

APPRENTICESHIP LEVY

"To ensure large businesses share the cost of training the workforce, I announced at the Budget that we will introduce a new apprenticeship levy from April (LSE: 0N69.L - news) 2017. Today I am setting the rate at 0.5 percent of an employer's paybill. Every employer will receive a 15,000-pound allowance to offset against the levy, which means over 98 percent of all employers, and all businesses with paybills of less than 3 million pounds will pay no levy at all. Britain's apprenticeship levy will raise 3 billion a year. It will fund 3 million apprenticeships, with those paying it able to get out more than they put in. It's a huge reform to raise the skills of the nation and address one of the enduring weaknesses of the British economy."

LESS CUTS IN EARLY YEARS

"The improved public finances allow us to reach the same goal of a surplus while cutting less in the early years. We can smooth the path to the same destination."

CAPITAL INVESTMENTS

"We will spend 12 billion pounds more on capital investments, making faster progress to building the infrastructure our country needs."

NO CUTS TO POLICE BUDGET

"I am today announcing there will be no cuts in the police budget at all. There will be real terms protection for police funding. The police protect us, and we're going to protect the police."

HELP TO BUY SCHEME FOR LONDON

"The government will help address the housing crisis in our capital city with a new scheme, London Help to Buy. Londoners with a 5 percent deposit will be able to get an interest-free loan worth up to 40 percent of the value of a newly-built home."

STAMP DUTY

"Frankly (Other OTC: FLKKF - news) , people buying a home to let should not be squeezing out families who can't afford a home to buy. So I am introducing new rates of Stamp Duty that will be 3 per cent higher on the purchase of additional properties like buy-to-lets and second homes. It will be introduced from April next year and we'll consult on the details so that corporate property development isn't affected. This extra stamp duty raises almost a billion pounds by 2021 - and we'll reinvest some of that money in local communities in London and places like Cornwall which are being priced out of home ownership."

LOANS NOT GRANTS FOR COMPANIES

"And we'll protect the cash support we give through Innovate UK, something we can afford to do by offering 165 million pounds of new loans to companies instead of grants, as France has successfully done for years. It's one of the savings that helps us reduce the BIS (Department for Business, Innovation and Skills) budget by 17 percent."

SMALL BUSINESS RATE RELIEF

"Our overall review of business rates will report at the Budget, but I am today helping 600,000 of our smallest businesses by extending our small business rate relief scheme for another year."

ENERGY-INTENSIVE INDUSTRIES EXEMPT FROM GREEN TARIFFS

"We're going to permanently exempt our Energy Intensive Industries like steel and chemicals from the cost of environmental tariffs, so we keep their bills down, keep them competitive and keep them here."

DIESEL

"The development and sale of Ultra Low Emission Vehicles will continue to be supported, but in light of the slower-than-expected introduction of more rigorous EU emissions testing, we will delay the removal of the diesel supplement from company cars until 2021."

TRANSPORT

"The Department for Transport's operational budget will fall by 37 percent. But transport capital spending will increase by 50 percent to a total of 61 billion pounds, the biggest increase in a generation."

SOCIAL CARE FUNDING

"The truth we need to confront is this: many local authorities are not going to be able to meet growing social care needs unless they have new sources of funding. That, in the end, comes from the taxpayer. So in future those local authorities who are responsible for social care will be able to levy a new social care precept of up to 2 percent on council tax."

SCALE OF CUTS, BALANCE OF WELFARE V INFRASTRUCTURE SPENDING

"People will want to know what the levels of public spending mean in practice, and the scale of the cuts we're asking government departments to undertake. Over this Spending Review the day-to-day spending of government departments is set to fall by an average of 0.8 percent a year in real terms. That compares to an average fall of 2 percent over the last five years. So the savings we need are considerably smaller. This reflects the improvement in the public finances and the progress we've already made. Indeed, the overall rate of annual cuts I set out in today's Spending Review are less than half of those delivered over the last five years. So Britain spending a lower proportion of its money on welfare and a higher proportion on infrastructure. The Budget balanced, with cuts half what they were in the last Parliament."

SIZE OF STATE TO FALL

"In 2010, government spending took up 45 percent of national income. This was a figure we couldn't sustain, because it was neither practical nor sensible to raise taxes high enough to pay for that, and we ended up with a massive structural deficit. Today the state accounts for just under 40 percent of national income, and it is set to reach 36.5 percent by the end of the Spending Review."

CUTS TO CABINET OFFICE, TREASURY BUDGETS

"The Government Digital Service will receive an additional 450 million pounds, but the core Cabinet Office budget will be cut by 26 percent, matching a 24 percent cut in the budget of the Treasury. And the cost of all Whitehall administration will be cut by 1.9 billion pounds. These form part of the 12 billion pounds of savings to government departments I am announcing today."

(Compiled by Estelle Shirbon and Sarah Young)