/ Money

How could George Osborne’s Budget help you?

George Osbourne budget brief case

With the Budget looming closer, our research reveals that the average household has slashed over £12,000 from their spending since the financial crisis. Will the Budget bring relief to struggling Brits?

The financial crisis and Britain’s struggling economy isn’t new to any of us, but it’s still shocking to see at just how much the average household has had to button down on spending. According to our own research, we’re spending £3,150 less a year since 2007. In all, we estimate that there’s been a £220bn loss to the economy since the beginning of the financial crisis.

Cutting back in the UK

There’s no question that times are tough and incomes are being squeezed, particularly the nine million who have had to cut back on essential spending (and that’s the real essentials) including food, housing and heating.

Worryingly, we also found that more than two million households have defaulted on a housing or bill payment in the last two months. I find this hugely concerning, not only from a financial point of view, but also just thinking about the stress and worry that these households must be facing on a day-to-day basis.

The wider effect on the economy

The other side of the coin is the effect this personal cutting back is having on a wider scale. With consumers feeling the squeeze and spending less on discretionary, non-essential goods and services in particular, this leaves a huge hole in the economy.

Take eating out as an example. When times are tight the odd meal out is one of the easiest things to sacrifice. This has translated into a £13bn cut in spending on eating out since 2007. Perhaps unsurprisingly, this has coincided with 90,000 fewer people being employed in the restaurant and catering industry.

This is something I hope George Osborne will keep in mind in his 2013 Budget. As our executive director Richard Lloyd said this weekend; ‘The UK has never before come out of recession without an increase in consumer spending, so it is critical that the Chancellor puts consumers at the heart of his plans for a return to growth.’

Bob says:
19 March 2013

He could:
1. Make all welfare payments subject to income tax
2. Make all income allowances restricted to the basic rate.
3. Continue merging NI and Income Tax
4. Continue increasing the scope of VAT
5. Reduce the scope of reduced tax fuel ( e.g. for agriculture, aircraft).

Burp! I do beg your pardon . . . but that penny off a pint of beer from Sunday evening went down well in the saloon bar. Bringing forward the higher starting level for income tax was popular too, as well as the help for businesses, investors, and homebuyers. I hope the protection of the education and health budgets doesn’t send out the wrong signals to two enormous sectors not known for their parsimony; they must continue to drive up performance in return for their exemption from the austerity package. Overall, a good display of fiscal jerks from Mr Osborne..

syd says:
21 March 2013

Probably the worse budget from The worse chancellor in history Nothing To boost the economy
Nothing to stimulate growth Are we still blaming Labour for the Now £244 billion deficit

I reach pension age in 2016. At the moment I have received a pension forecast that states I will receive a pension worth £167 a week. This is due to extra payments paid and by not contracting out. When they introduce the flat rate pension of £144 a week does that mean I will lose £23 a week. If so will I get a rebate on those extra payments. It is also worth noting that by the time I get to pension age I will have been paying NI contributions for 50 years with no missing payments. Do I get anything for those extra years that i have been paying.

NigelB says:
20 March 2013

I will reach State Pension age in March 2017, with a forecast pension of around £108 basic plus £90 second pension ie £198 pw. So when the flat rate pension was first announced in January I thought I had escaped its clutches. Now I am caught. I understand that current entitlement will be preserved, but on the other hand I will now need 35 years NI contributions rather than 30, so the basic element will be cut. I gave up work in 2006 thinking I had the necessary minimum. How does the government expect people to plan when they chop and change like this? Also it’s spun as an improvement, whereas for most they will just pay more and get less. And don’t mention the effect of quantitative easing in depressing annuity rates……

So what did you think about the Budget? Here’s our expert round-up of all the announcements: http://www.which.co.uk/news/2013/03/budget-2013—the-highlights-314292/

ODDm says:
20 March 2013

I reach pension age in Feb 2014.
I no longer will receive the enhanced Over 65 tax allowance in April and now I am to be a few weeks short of the enhanced (for some) pension – Great Budget
I am also a saver failing to match RPI even with ISAs in a currency that has declined 7% already this year .
Moral spend all your money and get into debt and let the Government/Bank of England inflate you out of it !

We’ve polled the general public to see what they think about the Budget and all the announcements… makes interesting reading: https://conversation.which.co.uk/money/budget-2013-george-osborne-fuel-duty-beer-tax-cuts-helptobuy-public-response/

Jack says:
22 March 2013

A penny off a pint, a boon to beer drinkers? So my £3 pint is now to cost £2.99. What nonsense! Which has lost it.

Why is the Chancellor wasting money on setting up a a new (but limited) mortgage guarantee scheme when long-standing provision is made for far wider assistance under s442 Housing Act 1985? More apparent than real for purely political purposes.

acglos says:
25 March 2013

The latest Which? newsletter states – Just 42% of people are currently contributing to a pension – with the most likely reason for not contributing being affordability.

May I suggest that a more likely reason is that most people no longer ‘trust’ the system to provide an acceptable return.

Anything saved (remember this is from previously taxed income), in whatever form, will be taxed again when you draw it out. At best you’ll be allowed just 25% of it as a tax free lump sum.

During your saving period, the financial institutions will have taken a tidy sum in charges.
Then when you apply for an annuity they (and your IFA) will again take a considerable charge from your savings for setting things up.

Annuity rates will be based on stock market performance, so you are putting your faith in a highly volatile system that appears to be run primarily to benefit the banks and brokers. The ‘crumbs’ are begrudgingly passed down to investors, once again after they charge you handsomely for managing your funds.

Is it any wonder that people are giving up on a discredited system?