Sinners, shoppers and savers: What will the Budget mean to you?

Chancellor George Osborne will deliver the Budget tomorrow. Photo: Stefan Rousseau/PA Archive


The usual hikes in the price of cigarettes and booze will be a certainty in the budget. Last time round 37 pence was added to a price of cigarettes.

Last time 37 pence was added to the price of cigarettes. Credit: Peter Byrne/PA Wire

Indeed, the government has just dropped plans for minimum alcohol pricing saying it will tackle problem drinking another way...could that mean even higher than usual "sin taxes"?

They are subject to automatic increases anyway - called an "escalator". This means a rise of at least 2% above inflation until 2014.

The government has dropped plans for minimum alcohol pricing. Credit: Johnny Green/PA Wire

Last year, duty on alcohol was raised by 2% over inflation, while duty on tobacco products rose by 5%. I think those of us with expensive habits are about to find they become even more costly.


Savers have had a dreadful time. A toxic combination of low interest rates and rising inflation are hitting them hard.

Savings rates, which were already low, have tumbled further since the introduction of the Funding For Lending scheme, which gives banks access to cheap finance. That means they don't need to use attractive rates to get savers deposits.

Savers have had a difficult time recently. Credit: Dominic Lipinski/PA Wire

The very people trying to do the right thing and prepare for the future, are being penalised as their capital is eroded by inflation.

One option for the Chancellor is to raise the ISA limit to just over £8,000 (it is now £5,640). This would allow at least some savers to deposit enough to restore the potential interest earnings (£180) they got a year ago. If he fails to do this he will be accused of turning his back on the prudent, and therefore it is a likely change.

The annual pension allowance was cut from £255,000 to £40,000 and the lifetime pension allowance – the total size your pension can grow - cut from £1.5m to £1.25m in the last budget.

The annual pension allowance was cut from £255,000 to £40,000. Credit: Chris Ison/PA Wire

The amount savers can put in a private pension pot each year could be further reduced - 30,000 has been predicted. The tax-free lump sum savers can now get when they take out their pension, may also be cut.

One of the key judgements on this budget will be how it treats savers.


The VAT we pay in shops increased from 17.5% to 20% in 2011.

Some economists have said this tax on our everyday spending may have to rise to 25% in order to meet the Chancellors pledge to cut the deficit.

Not likely! After last years ill-fated attempts to slap VAT on hot bakery products became known as the "pasty tax".

Hundreds of bakers protested outside Downing Street during a day of action over the "pasty tax". Credit: Geoff Caddick/PA Archive

There is scope for tinkering. Some goods and services have a reduced rate of 5% or even zero.

Most food and drink is zero-rated, but items considered confectionery, sweets and treats are taxed at 20%.

Confectionery is taxed at 20 per cent. Credit: Alistair Wilson 50/50/PA Archive

Any changes would be an added complexity, without raising large income, so surely the Chancellor will look elsewhere.

Opposition MPs have been calling for a temporary VAT cut to stimulate spending, but that would cost £13 billion a year in lost tax income.

The Chancellor has said:

The VAT rise is not temporary. It can’t be. We are talking about a totally different scale of revenue and the VAT rise is a structural change to the tax system to deal with a structural deficit.

– Chancellor George Osborne