GEORGE Osborne has begun the ­countdown to the General Election with measures on pensions and savings to woo Britain's grey vote as the Coalition hailed the package as "a Budget for the Union".

But a referendum row broke out after the Chancellor used his Commons statement to claim the latest North Sea estimates showed there would be a further £3 billion fall-off in oil and gas ­revenue between now and 2018.

Loading article content

This, he told MPs, was a "reminder of how precarious the budget of an ­independent Scotland would be," ­warning the further downgrades would leave every Scot £1000 worse off under independence.

Coalition ministers insisted the Budget measures would help convince Scots to vote No in the referendum but John Swinney, the Scottish Finance Secretary, hit back.

"Increased investment in the North Sea will lead to increased production, with a further 24 billion barrels of oil still to come from the North Sea," declared Mr Swinney.

He insisted the Chancellor's Budget offering was Westminster's last chance to show it could create opportunity for Scotland and reject the diet of austerity. "Once again, it has failed to deliver for Scotland," he added.

Camley's Cartoons: on the budget

Meanwhile, Ed Miliband, the Labour leader, pointed out that ordinary ­workers were still £1600 a year worse off under the Tories, who he said had created an "economy of the privileged, by the privileged, for the privileged".

With a backdrop of rosier economic figures and continuing falls in unemployment, the unexpected centre-piece of the Budget was the biggest shake-up to tax rules on retirement pots for almost a century. One analyst dubbed it the "great granny giveaway".

The changes, due to come into effect next April, mean people will find it easier to cash in smaller pension pots and will no longer be forced to use their savings to buy an annuity. They will have "complete freedom" to draw down as much or as little of their pension pot as they want, anytime they want, Mr Osborne told MPs.

Alistair Carmichael, the Scottish Secretary, claimed the pension changes would "put pressure on the SNP because the future of pension provision is one of the biggest single risks that's apparent from Scottish independence". The Secretary of State denied the pensions and savings reforms were aimed at bribing older voters.

"No-one is getting bribed here," he said. "Older people, especially those relying on their savings, have struggled in recent years. In order to reconstruct the economy we have had to see interest rates remaining historically low. Now we are coming out of economic difficulties, that is changing.

"The Chancellor is creating a ­sensible route to ensure older people on fixed incomes are able to share in the benefits of economic growth."

Acknowledging that low interest rates had hit savers hard for years, Mr Osborne also announced a new Pensioner Bond, which will pay market-leading rates from January to all those over 65, with interest rates of 2.8% for one-year bonds and 4% for three-year bonds. These are expected to be taken up by at least one million pensioners.

The Government also unveiled its new Isa, dubbed the Nisa, where savers can pool their cash and stocks and shares savings into one product with a new tax-free limit of £15,000 a year. This is expected to help 24 million people.

Banks and building societies welcomed the move, with Nationwide describing it as "much-needed support for ordinary savers".

Hailing the success of the Coalition's austerity programme, Mr Osborne said UK plc would grow by a better-than-forecast 2.7% in 2014 and the Government would be back in surplus by 2018/19. Borrowing is expected to be £108 billion this year, £12bn less than forecast.

Having earlier in the week announced plans to expand childcare for working parents and build another 120,000 homes to help first-time buyers, the Chancellor, as expected, pushed the personal income tax allowance up to £10,500 next year.

But he resisted pressure from Conservative backbenchers - and two Tory former chancellors - for a significant increase in the 40p income tax threshold, which will rise more slowly than inflation to £41,865 next month and £42,285 in 2015/16.

A political battleground for the General Election was set with the announcement of a £119.5bn cap on overall welfare spending, excluding the state pension and jobseeker's allowance.

Labour announced it would back the policy in a Commons vote next week, but with the Conservative leadership already seeking £12bn further welfare cuts after the election it seems all but certain the Tory manifesto will promise to reduce the cap, forcing Labour and the Liberal Democrats to say whether they would do the same.

Among some of the more eye-­catching, crowd-pleasing measures was the decision to scrap the whisky duty escalator and freeze a planned rise, which will save consumers 42p a bottle.

This had been campaigned for by the drinks industry and Scottish politicians from various parties. The SNP's Angus Robertson, whose Moray constituency contains more than half of Scotland's malt whisky production, welcomed the moves but pointed out this still meant almost 80% of the price of a bottle of whisky went to the Treasury in tax.

Other announcements included the scrapping of the duty escalator on wine, a penny off a pint of beer, a cut from 20% to 10% on bingo halls duty and another freezing of petrol duty. But tobacco taxes will go up by 2% above inflation.

Another mooted part of the so-called "Union dividend" - the devolution of Air Passenger Duty - did not ­materialise, although the Chancellor announced the first cut in the tax on long-haul flights since it was introduced 20 years ago.

Inheritance tax will be waived when members of the emergency services die in the line of duty, and cash from Libor fines on bankers will go not only to military and emergency service charities, but also to search-and-rescue and lifeboat services, the Scouting movement and St John Ambulance.

For business, Mr Osborne raised a cheer from the Tory benches with the announcement that investment allowances for small and medium-sized businesses would be doubled to £500,000, one of a host of breaks for exporters and manufacturers.

In a signal that he believes "green levies" have gone too far, the Chancellor unveiled a £7bn package to cut annual energy bills for typical manufacturing companies by £50,000 while also saving families £15 a year.

Mr Osborne highlighted predictions from the independent Office for Budget Responsibility that employment will rise by 1.5 million over the next five years, with earnings growing faster than inflation in every year over the period.

But the Coalition is only ­halfway through cutting the ­deficit, which means further public-sector cuts worth billions of pounds will have to be made as the books are not due to be balanced until 2018, four years later than originally planned.

Addressing a noisy Commons, Mr Osborne, cheered by colleagues on the Coalition benches, said: "The message from this Budget is: you have earned it; you have saved it; and this Government is on your side, whether you're on a low or middle income, whether you're saving for your home, for your family or for your retirement."

"The forecasts I've presented show: growth up; jobs up; and the deficit down. With the help of the British people we're turning our country around. We're building a resilient economy."

He insisted: "This is a Budget for the makers, the doers, and the savers."

However, Mr Miliband responded by saying: "The ­Chancellor spoke for nearly an hour but he did not mention one central fact: the working people of Britain are worse off under the Tories."

The Labour leader insisted all Mr Osborne had done was remind people of the gap between government rhetoric and the reality of their lives.

"Living standards falling for 44 out of 45 months under this Prime Minister, unmatched since records began; no amount of smoke and mirrors can hide it," he declared.