Budget 2014: Osborne's speech is one for savers, pensioners, drinkers – and floating Tory voters

Chancellor announces pensions shake-up to woo over-50s, tax-free savings limit increase and a raise in the threshold for higher rate tax - but Labour says young are being ‘left even further behind’

George Osborne was accused of compounding the problems facing Britain’s “jilted generation” of young people after he unveiled a “silver savers’ Budget” aimed at winning the over-50s vote at next year’s general election.

The Chancellor’s big surprise was a sweeping shake-up of pensions and savings which will allow people to draw down all of their pension pot in cash when they retire, instead of having to buy an annuity to provide an annual income.

The limit for tax-free individual savings accounts (Isas) will be raised to £15,000 a year and pensioners will be able to buy new bonds with above-market interest rates.

What Mr Osborne hailed as “a Budget for the makers, doers and savers” was widely seen as an attempt to target the over-50s before next year’s general election. The “grey vote” is a key group because it turns out in much higher numbers than young people. It includes many natural Conservative supporters, some of whom have been attracted by the UK Independence Party.

Read more: The Independent's Budget coverage in full

The Chancellor regards the biggest reforms to pensions since 1921 as his second most important measure after his drive to balance the nation’s books. However, the small print reveals that the pensions changes will bring in £1.2bn to the Treasury by 2018-19 because people will pay income tax on the money they take out of their pension pots.

Insurance shares plunged by £3bn after the Budget, with leading annuities providers including Legal & General, Aviva, Standard Life and Prudential seeing sharp share price falls.

 

Mr Osborne could bask in a much better outlook for the economy. The Office for Budget Responsibility (OBR) revised its growth forecast for this year to 2.7 per cent, up from its 2.4 per cent figure in December. It predicted growth of 2.3 per cent next year and 2.6 per cent in 2016. The OBR revised down its borrowing figure for the current financial year from £111bn to £108bn, saying it would fall to £95bn next year and predicting a £5bn surplus by 2018-19.

The Chancellor said his spending cuts would have to continue after the election, adding: “The question for the British people is: who has the credibility to deliver them?” He tried to set a trap for Labour by imposing a £119bn cap on the welfare budget by 2015-16, covering all areas except the basic state pension and jobseeker’s allowance. But Labour said it would support the cap in a Commons vote next week.

Mr Osborne found room for some limited pre-election sweeteners – a 1p a pint cut in beer duty; freezing the duty on spirits and ordinary cider and halving bingo duty to 10 per cent. Business received help with energy bills, and new tax breaks and incentives to encourage companies to invest and export.

The Chancellor confirmed that the personal tax allowance would rise from £10,000 next month to £10,500 in April next year. As The Independent revealed on Saturday, he rejected growing calls from Conservative MPs to aid the middle classes by bringing in a higher than expected threshold for the 40p tax band. It will rise by 1 per cent, less than inflation, in each of the next two years – from £41,450 to £41,865 next month, and then to £42,285 next year, effectively dragging more people into the 40p band as their incomes rise.

The Liberal Democrats trumpeted the £10,500 personal tax allowance that Nick Clegg had demanded in November, going further than his £10,000 flagship policy at the 2010 election. In a Coalition trade-off, the Liberal Democrats approved Mr Osborne’s “savers’ package”, which was not their top priority.

Labour argued that the pensions and savings measures would provide most help to the rich and would not tackle the cost of living crisis. Ed Balls, the shadow Chancellor, welcomed moves to “empower” people to get a better deal on annuities amid low rates but warned that many could end up with a bad deal. “Will we have people disadvantaged or taken down the wrong road?” he asked. “Will we have people running out of money and forced to rely on the welfare state?” Mr Balls said the savings ratio, the proportion of people’s disposable income they save, would decline rather than rise.

Labour joined charities in highlighting a “generation gap” in the Budget. A Labour source said: “There was absolutely nothing to help young people, despite record unemployment. After this Budget, they are left even further behind.”

William Higham, Save the Children’s director of UK poverty, said: “The Budget was a missed opportunity to address the needs of families that are struggling to pay their food bill and children whose parents cannot afford to pay for uniforms and school trips.”

Osborne aides insisted that young people would benefit from the higher Isa limits; the rise in the personal allowance; an extension of the Help to Buy scheme and more apprenticeships. They denied that the savings shake-up would benefit the rich, saying that three-quarters of the five million people who currently saved up to their cash Isa limit were basic rate taxpayers.

Ros Altmann, a Downing Street pensions adviser under Tony Blair, said it was “a brilliant Budget for Tory election prospects.” Chris Sanger, the head of tax policy at Ernst & Young, said Mr Osborne’s “great granny giveaway” would “make saving for a pension much more attractive”.

But Nigel Green, the chief executive of the deVere financial advisory group, warned: “This policy of allowing a full drawdown [of pension pots] is extremely dangerous and ill-conceived for both individuals, who are considerably more likely to become financially dependent on the state, and the wider economy, which needs the population to be as financially independent as possible.”

Budget 2014: The key changes

* Level at which people start paying income tax to be increased to £10,500.

* Cash and shares Isas to be merged into single New Isa with £15,000 annual limit.

* All restrictions on access to pension pots to be removed, ending the requirement to buy an annuity.

* New Pensioner Bond available from January.

* Beer duty cut by 1p a pint while duty on spirits, whisky and ordinary cider is frozen. Tobacco duty to rise by 2 per cent above inflation.

* All long-haul flights to come under lower rate of Air Passenger Duty currently charged on flights to US.

* Help to Buy for new-build homes extended to 2020.

* Bingo duty halved to 10 per cent but duty on fixed-odds terminals rises to 25 per cent.

* Package to cut energy bills.

Arts and Entertainment
The eyes have it: Kate Bush
music
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
Arts and Entertainment
Al Pacino in ‘The Humbling’, as an ageing actor
filmHam among the brilliance as actor premieres two films at festival
News
Fifi Trixibelle Geldof with her mother, Paula Yates, in 1985
people
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Sport
Mario Balotelli in action during his Liverpool debut
football ...but he can't get on the scoresheet in impressive debut
Environment
Pigeons have been found with traces of cocaine and painkillers in their system
environmentCan species be 'de-extincted'?
Arts and Entertainment
booksExclusive extract from Howard Jacobson’s acclaimed new novel
News
i100
Arts and Entertainment
A Pilgrim’s Progress is described by its publisher as “the one-and-only definitive record” of David Hockney's life and works
people
Sport
Loic Remy signs for Chelsea
footballBlues wrap up deal on the eve of the transfer window
News
i100
Arts and Entertainment
Art
Arts and Entertainment
Elizabeth McGovern as Cora, Countess of Grantham and Richard E Grant as Simon Bricker
TV
Life and Style
Instagram daredevils get thousands of followers
techMeet the daredevil photographers redefining urban exploration with death-defying stunts
Arts and Entertainment
Diana Beard, nicknamed by the press as 'Dirty Diana'
TVDaughter says contestant was manipulated 'to boost ratings'
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Year 4 Teacher

Negotiable: Randstad Education Plymouth: Year 4 Primary Teachers needed for Se...

Teacher

£100 - £120 per day: Randstad Education Chelmsford: We are currently recruitin...

SEN Teacher

Negotiable: Randstad Education Cheshire: SEN Teacher required with Early Years...

KS2 Teacher

£21588 - £31552 per annum: Randstad Education Chelmsford: Exceptional teacher ...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor