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.

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
sportDidier Drogba returns to Chelsea on one-year deal
News
people
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Louis van Gaal would have been impressed with Darren Fletcher’s performance against LA Galaxy during Manchester United’s 7-0 victory
football
Voices
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Sport
Rhys Williams
commonwealth games
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
News
Isis fighters travel in a vehicle as they take part in a military parade along the streets of Syria's northern Raqqa province
i100
Life and Style
fashionLatex dresses hit the catwalk to raise awareness for HIV and Aids
Travel
travel
Life and Style
The veteran poverty campaigner Sir Bob Geldof issues a stark challenge to emerging economies at the Melbourne HIV/Aids conference
health
Arts and Entertainment
Benedict Cumberbatch and John Malkovich talk Penguins of Madagascar at Comic-Con
comic-con 2014Cumberbatch fans banned from asking about Sherlock at Comic-Con
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
filmGuardians Of The Galaxy should have taken itself a bit more seriously, writes Geoffrey Macnab
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

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

Commercial Litigation Associate

Highly Attractive Package: Austen Lloyd: CITY - COMMERCIAL LITIGATION - GLOBAL...

Systems Manager - Dynamics AX

£65000 - £75000 per annum + Benefits: Progressive Recruitment: The client is a...

Service Delivery Manager (Software Development, Testing)

£40000 - £45000 per annum: Ashdown Group: A well-established software house ba...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform