Nov 25, 3:32 PM EST

UK backs off cuts to tax breaks for lower income households

Photo Gallery
Animal census at the London Zoo
Latest News from Britain
British leader sets Syria airstrikes debate for Wednesday

High Court rules against Northern Ireland's abortion law

Prosecutors: London gem heist suspect used retiree bus pass

Fathers' rights protesters climb onto Buckingham Palace roof

UK, EU leaders to discuss technicalities of EU reform

UK government minister quits amid Conservative bullying row

Buy AP Photo Reprints
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
European Central Bank may surprise with size of new stimulus

Egypt aims for 5.5 percent economic growth

Japan leaders in SOS to cash cow companies as recovery lags

Survey shows German consumers losing confidence

Signs of steady US economy: Rising pay and solid job market

UK backs off cuts to tax breaks for lower income households

Since '01, Clintons collected $35M from financial businesses

US economy grew at 2.1 percent rate in third quarter

South Africa narrowly avoids entering a recession

Airstrikes hurt, but don't halt, IS oil smuggling operations

Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt
Related Stories
McKelvin recalls fumble in Bills' last Monday night meltdown

LONDON (AP) -- Britain's Treasury chief abandoned controversial cuts in tax credits for the working poor and kept police funding intact on Wednesday as he updated Parliament on the government's budget plans.

George Osborne said improvements in public finances made it possible to back away from the unpopular credit cuts his government had proposed earlier. As members of his party cheered, Osborne said he accepted the concerns of those who feared the impact on people making minimum wage.

"I've listened to the concerns. I hear and understand them," he said. "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 move was made possible by higher than predicted tax receipts and lower interest rates. The Office for Budget Responsibility, an independent agency, estimated that public finances would be 27 billion pounds ($40 billion) better off over the course of Parliament than it had forecast in July.

A measure to eliminate 4.4 billion in tax allowances for the poor had been blocked in April in an unusual move by the House of Lords, the upper house of Parliament. The vote was a sharp defeat for Prime Minister David Cameron's government, which had claimed the cuts would be offset by a higher minimum wage.

Despite the U-turn on tax credits, Osborne promised to keep in place 12 billion pounds of cuts from the welfare budget over the next five years. The cuts were promised by the Conservative Party during the last election.

He also announced plans to boost property ownership as he delivered the so-called Autumn Statement, one of two showpiece budget updates.

Osborne announced plans to help build 400,000 affordable homes, a decision that had prompted British newspapers to print images of him in a hard hat and describe him as "George the Builder." Housing is under strain throughout the country.

But the statement also detailed deep cuts in public spending, effectively shrinking the size of government. No cuts were made in policing in the wake of the recent attacks in Paris.

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

The opposition Labour Party quickly countered that the British people will feel "betrayed" by Osborne's failure to eliminate the deficit.

"Today is the day the chancellor was supposed to announce austerity was over," said John McDonnell, the economic spokesman for Labour.

To the bemusement of the chamber, he waved a copy of the late Mao Tse-Tung's little red book, quoted the Chinese leader's advice on economic policy and joked about the government's recent overtures to attract Chinese investment.

He then tossed the book in Osborne's direction and said "I thought it would come in handy for you in your new relationship."

The Treasury chief picked it up and said: "Oh look! It's his personal signed copy.

"The problem is half the shadow cabinet have been sent off to re-education," Osborne said of the Labour leadership.

In accompanying economic forecasts, the Office of Budget Responsibility predicted economic growth of 2.4 percent this year, 2.4 percent in 2016, and 2.5 percent in 2017.

© 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.