Budget could add to debt problems

The increase of VAT to 20 per cent will cost Britons £13bn over the next five years, heaping further debt misery onto many.

And the tax rise may lead to a rise in unemployment figures, as research from uSwitch.com shows that many small businesses worry about the costs of higher VAT.

With inflation expected to be at 2.7 per cent by the end of the year, the public sector workers who have had their salaries frozen are going to have to squeeze every last drop of value out of their pay packets, or have to face up to seeking debt solutions.

From next year, benefit claimants may be affected too, as any rise in hand-outs will be linked to the lower Consumer Price Index, rather than the Retail Price Index. This move will cost debt-laden Britons £6bn by the end of this parliament.

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