33 million consumers fear they will be worse off following Budget

According to new research by uSwitch.com, The Budget has left 67% of consumers – potentially 33 million people – feeling worse off. But while 51% of people now feel less confident about their own finances, 42% are now more confident about the country’s finances, suggesting that the Government’s message about ‘unavoidable’ pain is starting to get through.

The Budget has left consumers with mixed views – while almost a quarter (24%) now feel more confident about the end of the recession, 32% feel less so. But, unsurprisingly given the huge cutbacks announced, 29% of people (14 million) now feel less confident about their jobs while just 6% feel more secure.

Fears that a cutback in consumer spending may spark a double dip recession could still become reality – 8 in 10 consumers (83%) say they will be changing their behaviour post-budget. Of these, 27% will now be cutting back on spending. And the VAT increase in January could cause a second behaviour shift: 48% will re-think big purchases, 50% will cut back on luxuries and as many as 12 million (24%) will reduce the amount they spend on food.

However, the delay in the VAT hike may be a blessing for the economy. Before The Budget, just 4 million (8.5%) said they would rush through big purchases ahead of a VAT increase. Since the VAT rise had been announced this number has doubled, with over 9 million (19%) now planning to hurry big ticket buys buys through before January.

Over a third of consumers (35%) say that the council tax freeze will help them. But cuts to child tax credits and benefits will hit families hard. Over 4 million (9%) will be significantly affected by the reduction in child tax credits, while 59% say the same of the hike in VAT.

Consumers’ personal finances are clearly inextricably linked with those of the country – 8 in 10 (82%) acknowledge that the budget deficit will have an impact on their everyday life, while 9 in 10 (90%) agree that it is a long-term issue that will have an impact on the British economy for the foreseeable future. But tackling the country’s finances has come at a personal cost with The Budget leaving 23 million (47%) concerned about their own financial position.

Ann Robinson, Director of Consumer Policy at uSwitch.com, said:

“The good news is that consumers believe The Budget has been for the greater good. The bad news is that it has come at great individual cost. While it may succeed in tackling the national debt in the long run, consumers are clearly concerned about what it means for them personally in the shorter run.

“Now that the VAT hike has become a reality, many are thinking of rushing big ticket items through before January when the increase kicks-in. This may be a good thing for the economy, off-setting at least in part a general reduction in spending which is consumers’ natural reaction to the measures announced on Tuesday.

“However, once the VAT hike takes effect, consumers will be cutting back on luxuries, and even necessities like food. The Government has bought itself some time, but come January it could be facing double jeopardy.

“The initial reaction will always be a knee jerk, but consumers should look at combating the impact of The Budget by cutting back painlessly on household bills. It’s estimated that the increase in VAT will cost the average family an extra £500 a year – you can easily claw this back by ensuring you are paying the lowest possible price for the basics. This will free up some cash so you can carry on enjoying your current standard of living. It will be a challenge, but at least most consumers recognise a more positive future for the country, which will in turn mean a better future for them individually.”