Any way it is spun, the £156bn annual public-sector deficit is a mind-boggling figure, and it's Chancellor George Osborne's job this Tuesday to set out his first steps for bringing it under control.
Mr Osborne wants up to 80 per cent of the black hole to be closed through spending cuts, but experts are predicting big changes to VAT, capital gains tax, income tax and tax credits to account for the remaining 20 per cent.
"It's like a reverse Christmas – we don't quite know what's going to be taken away from us. But the Government might want to get the pain over quickly, better to introduce it all now at the beginning of its term rather than near the end," says Anne Redston, professor of tax law at King's College London.
Nearly all experts, including Professor Redston, predict that VAT will rise, probably to 20 per cent, although there is a difference of opinion as to whether the change will happen in the autumn, on 1 January or next April. Shops and suppliers need time to adjust pricing to protect their margins, and a delay in introduction could have the beneficial effect of persuading people to spend now, before the rise is introduced.
"VAT has the aura of affecting the less well-off disproportionately and is one of the paths the Government will do all it can to avoid, " says Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified Accountants. But with a possible £12bn to be made from a 2.5 per cent rise, most feel it is unlikely the Government will resist. There is also a majority consensus that the Chancellor will not alter the zero VAT rate, on such things as food, books and transport. As Professor Redston says: "It would be a waste of time to tinker with the exemptions. It is likely to cause very strong, targeted anger. It would make them look very mean to add it to children's clothes."
Stephen Coleclough, a partner specialising in indirect taxes, at PricewaterhouseCoopers, who predicts a rise to 20 per cent next April, wonders if Mr Osborne may not follow his 1973 predecessor, Anthony Barber, and introduce a 10 per cent VAT rate on sweets, ice-cream, salted peanuts, crisps and soft drinks. Another possible VAT addition, says Mr Roy-Chowdhury, would also echo the then Chancellor, Kenneth Clarke, who in 1997 was thought to want VAT on gas and electricity to rise to 17.5 per cent.
Capital gains tax is nailed on for change on Tuesday. The most common assumption is that the current rate of 18 per cent will be changed in line with an individual's tax rate – 10, 20, 40 or 50 per cent.
"Inevitably," says a confident Mr Roy-Chowdhury, "We will see a rise in CGT from 18 per cent to the marginal rate of tax. But I doubt it will come in one fell swoop, so as not to penalise prudent savers. I also think that with inflation above 5 per cent in April and May, inflationary indexation will be introduced, and there will be a long-term taper relief [allowing people to pay a reduced rate the longer they have held the asset]. In fact, it will be reinventing the old system."
Gary Shaughnessy, the UK managing director at Fidelity International, who estimates that an individual who invested £100,000 in a second property in 1985 to fund their retirement would currently face a tax bill of £68,493, based on the value of their property having risen to £490,617. But if CGT were raised to an income tax rate of 40 per cent, the tax bill would rise to £152,207 – more than their original investment. "We support the case for raising CGT to the marginal rate for individuals who are seeking short-term speculative gains," he says. "However, we believe that all individuals who are saving prudently for the long term should be rewarded, and this can be achieved by applying CGT at the basic rate of tax."
But John Whiting, president of the Chartered Institute of Taxation, hopes that Mr Osborne will resist tampering with CGT. "I really hope that they will not introduce anything new on CGT but take their time to get it right."
Whatever changes, if any, are introduced, the timing with CGT is important if the Government is to avoid what Professor Redston calls a "massive closing-down sale". "It will just be too chaotic to give a warning that rates will change in a year, so they will probably date any changes from Tuesday."
Along with other experts, Professor Redston expects employee shares to continue to be protected from CGT, but that second or rental homes will not be. The £10,100 tax-free threshold is also expected to remain, despite Lib Dem calls for it to be lowered.
Pensions, and the tax relief they attract, is another area that has been subject to pre-Budget speculation. The coalition has already agreed to restore the earnings link to basic state pensions, but it may also removefurther pension reliefs, due next April, from high-income earners, and perhaps lower the proposed threshold for tapering of higher-rate relief, which is set at £150,000.
But Professor Redston hopes that the Budget will not reveal anything definite. "I would like to see them suspend pension changes and set up some sort of group to look at tax relief. It's too generous for the rich and too complicated.
"I would also like him to freeze Nest [the National Employment Savings Trust] pensions for the low-paid. They are burdensome, and those they are designed for should be paying off debt, not saving for a pension. Pensions have got in a real mess. Save money and make it simple."
On income tax, the Chancellor is expected to phase in an increase in the personal allowance,currently £6,475, to a £10,000 threshold, from next April, which many experts see as being part of a package that will reduce reliance on tax credits and ben efits. The family element of tax credits is most likely to be targeted by the Chancellor, as it can be claimed by families with an income in excess of £50,000.
"I expect to see dramatic cuts of tax credits for anyone over the average income level," says Mr Roy-Chowdhury. "It is seen as too generous. Streamline and reduce them for all but the poorest of the poor. All benefits are probably up for grabs, with child benefit possibly being linked to tax rates, or means-tested."
So called "sin taxes" on alcohol and tobacco are expected to be raised, although there is a body of opinion that the rise in VAT will be enough. Professor Redston also suspects there may be duty added to "sinful" foods, such as high-fat snacks.
Most of our experts expect residential stamp duty to remain as it is, with the higher rate of 5 per cent introduced in Labour's last Budget to stay, and the "holiday" for first-time buyers to be made permanent. And, on air travel, most predict the duty levied on passengers will be switched to the aircraft, linked to how much fuel is used.
Whatever the Chancellor announces on Tuesday, there is little that most consumers can do but wait and see what the impact on the money in their pocket will be. But for those who have investments that may be subject to CGT, who have overseas properties, or even holidays planned, there could be action you can take tomorrow to lessen the burden.
Carl McColgan, regional director of Ashcourt Rowan Financial Planning, says that until Mr Osborne's timetable for introducing CGT changes is announced, he has advised clients to plan on the basis of four options: all alterations will come into force on Tuesday; next April; phased in between those two dates; or be made retrospective to April 2010.
"Those with large gains on shares or investments may want to consider selling now, before the rates rise," he says. "Equally, those who have, for example, seen their BP shares fall may want to consider selling, to off-set the loss against gains elsewhere. Or, they could sell to rebuy and place the shares in a long-term Sipp plan."
Mr McColgan adds that all is not lost if investors miss the cut-off for any rate rises, particularly if the link with income tax is introduced.
He is advising clients to reinvest their gains into an Enterprise Investment Scheme, under which CGT can be deferred, possibly until the investor has retired and is paying basic rate tax, rather than a possible 40 or 50 per cent.
Anne Redston, professor of tax law at King's College London
"Trying to tackle a deficit while paying tax credits is like running a bath with the plug out. The level of fraud and error is so huge that the National Audit Office can't sign off HMRC accounts. Changes may not be for this Budget, but should be put in Frank Field's remit." (He is David Cameron's adviser on poverty.)
John Whiting, president of the Chartered Institute of Taxation
"I hope George Osborne starts as he says he means to go on, and does not pull any rabbits out of the hat. Surprise us with no surprises. We want a steady, consultative way to balance the books."
Mike Warburton, tax director at accountants Grant Thornton
"That the personal allowance will go up by £1,000 is a very good thing. It's crazy that someone can work for minimum wage and still get caught by tax. Personal allowances have fallen a long way from where they should be."
David Kerns, from foreign exchange broker Moneycorp
"It is important to stress just how critical this Budget is for the UK. It is very important for the credit standing and the status of the country. Everyone is expecting real hardship from Tuesday, but it is necessary that the Chancellor is very robust from the go."