Budget 2013: what it means for you


George Osborne

George Osborne started 2013 Budget Day by opening a Twitter account at @George_Osborne, and Tweeting about his upbeat enthusiasm (plus pictures of himself with the red box). During his speech, he also did his best to mention his new catchphrase as much as possible - The Aspiration Nation. And he ended by promising a budget for a nation that was 'prosperous, solvent and free'.

However, there was no denying that behind the optimistic rhetoric, there was much to be gloomy about.

Osborne started by making it clear that he would not take the 'gamble' of changing direction on the economy and attempting to buy his way into growth. He said he will continue on the path he has chosen, of cutting spending and making 'difficult choices' - so the bad news is that the era of austerity is far from over.

With that in mind, he announced it would be a fiscally neutral budget overall - which means that any giveaways will be funded by cuts elsewhere.


Osborne started by saying he was going "to be straight with the country". And proceeded to unveil some very difficult numbers.

There was more bad news from the Office for Budget Responsibility, which was forced to downgrade growth expectations yet again. It said that economy is expected to grow by just 0.6% this year, not 1.2% as expected.

Meanwhile national debt will hit 85% of GDP, and will not start falling until 2017-18. This is a year later than expected. There was plenty of talk of 'difficult economic conditions'.


As was widely predicted, the big piece of good news in the Budget was the raising of the personal tax allowance. The stated aim had been to bring it to £10,000 by 2015, but this was brought forward to April 2014. Osborne said this would save a typical working family £700 a year.

There will also be a number of new anti-avoidance measures, such as new agreements with the governments of The Isle of Man, Guernsey and Jersey, and plans to end abuse of partnerships. The government will also name and shame those firms who market aggressive tax-avoidance schemes in future.

State Pension

As Osborne announced last weekend, the reform of state pensions, bringing in a flat-rate pension worth around £144 a week, will be brought forward from 2016 to 2015.

Care costs

The cost of care will be capped, so that no-one will ever have to pay more than £72,000 for care in their old age. This was down from £75,000 previously announced in the Houses of Parliament.

However, he also announced a massive change to the means test, which establishes the assets someone is allowed to hold before they qualify for help from the outset. This has been raised to £118,000.


Osborne announced a new scheme, which he described as a 'dramatic intervention', called Help to Buy, which offers two things:

1) A commitment of £3.5 billion for shared equity loans for people buying new-builds. Anyone who puts down a 5% deposit can get a loan from the government for 20% of the value of the property - which is interest-free for the first five years and repayable when the property is sold. There is no cap on income on those who qualify, although the home cannot be worth more than £600,000.

2) A new mortgage guarantee to encourage lenders to lend to people with small deposits. This will use the government's balance sheet to guarantee loans for those who pass the credit tests, and Osborne said it will free up £130 billion more in mortgage lending.

He also unveiled plans for 15,000 more affordable homes, a five fold increase in funds for building new properties for rent, and an extension of the right-to-buy scheme.

Budget 2013: Winners and Losers

Budget 2013: Winners and Losers


Already announced by David Cameron and Nick Clegg, will be a new tax-free childcare scheme, to replace the current vouchers scheme. It will be worth up to £1,200 for each child under 12 and it will be phased in from Autumn 2015 (at which point the under-fives will come into the scheme). It will apply to those working parents where each earns less than £150,000, and where they are not in receipt of any tax credits.

In addition there will be an increase in childcare support for low income families through the new Universal Benefit scheme

Alcohol and Tobacco

The duty or 'sin taxes' are on an escalator of inflation plus at least 2%, and have been a cash cow for the government. This time round the government was under extra pressure to boost alcohol duty, after plans to introduce minimum alcohol pricing stalled. It says it will continue to pursue ways of stopping the sale of the cheapest alcohol in supermarkets, but will not punish pubs in the process.

The alcohol duty escalator will continue as planned - but beer will come off it for good - and as an extra boost Osborne has taken a penny off the price of beer.

Fuel Duty

As was widely predicted, Osborne froze the fuel duty hike due in September 2013. He announced that his repeated scrapping of this duty has saved the average Ford Focus owner £7 on every tank of petrol.

Equitable Life

He announced more help for victims of the Equitable Life scandal - specifically those who bought annuities before 1992 will receive £5,000, and those on low incomes will receive an extra £5,000.


As was widely leaked before the Budget, the spending cuts in Whitehall continue apace. Most departments will need to cut their budgets by 2% over the next two years - this is on top of the 3% cuts which were announced in the Autumn Statement. Only health, defence and the taxman will be spared. By the end of the parliament, the plan was to cut departmental budgets by £10 billion. The new plan is to cut them by £11.5 billion.

Public Sector Pay

There was bad news for public sector workers, who will see pay increases limited to 1% in 2015/2016. The government will also revisit 'progressive pay' which sees pay increase automatically each year which he said was 'difficult to justify' given that private sector pay has been frozen or cut. The armed forces, however, will be exempt from this.


The savings will be ploughed into infrastructure projects, which are designed to boost growth. In addition to the huge range of projects already announced, he committed to extending the investment period. The money was due to dry up in 2015/16, but he has committed a further £3 billion a year.


The first big announcement for business was corporation tax, which will be cut to 20% from April 2015. This was widely expected and Osborne said it would bring in the lowest business tax of any major economy in the world.

The second big announcement was a cut of the first £2,000 of every employer's National Insurance bill in April 2014. Osborne said this would particularly help small and medium-sized businesses - as 98% of the benefit would go to these firms.

Businesses who take employees back after long-term sickness absence will get additional help. He will also allow businesses to offer twice as much in tax-free loans to employees as before - which is usually for things like season tickets.

He announced additional help for the seed enterprise investment scheme, and more benefits for those taking on employee shareholder status, and businesses who sell shares onto their employees.

He will give regions more control over spending, including a single pot of funding for local enterprise. There will also be £1.6 billion of funding for the industrial strategy, tax reliefs for the creative and visual effects industries and more controls on what regulators can require businesses to do. This is expected to limit the power of the pensions regulator - to stop them raising the bar on workplace pensions so high that they force businesses under.

There will be tax relief for investment in social enterprise, and the R&D credit will be increased to 10%.

There will be exemptions for carbon-intensive industries from the climate change levy, and new tax incentives for ultra low emission vehicles.


The big banks will continue to pay a small slice of profits for their part in the financial crisis - now at 0.142%.

However, there is help for investment companies in this Budget. There is more generous tax treatment for funds domiciled in the UK, and stamp duty on shares traded in growth markets (such as AIM) will be abolished.


Osborne announced support for North Sea decommissioning, and major support for the shale gas industry - with a new tax relief designed to promote investment in the early stages of exploration. He said: "Shale gas is part of the future and we will make it happen."

International Aid

The promise to spend 0.7% of GDP on international aid will be kept.

Bank of England

There were changes to the way the Bank of England Monetary Policy Committee operates. Inflation targeting will still be their main aim, but now they will be expected to communicate more about what they are doing, and forecast a bit more about what their intentions will be in the future. They will also be allowed to use 'unconventional monetary policy instruments' to achieve their goals.

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How The Budget affects you