With the 2.5% VAT rise coming in to play today, the country braces itself for an expensive start to 2011.
The rise in VAT from 17.5% to 20% is expected to raise £13 billion a year for the Treasury, with the government claiming the change is necessary to help bring down the UK's high budget deficit.
Using figures drawn up by the Liberal Democrats before the last election, Ed Miliband claimed yesterday that the increase in VAT would cost the average family £7.50 a week, or around £390 a year.
Defending the move, Mr Osborne told the BBC Radio 4 Today programme: 'I think it is a reasonable rate to set, given the very difficult situation we find ourselves in. The VAT rise is a tough but necessary step towards Britain's economic recovery.
On top of this, those heading back to work today will be faced with rail fare rises of up to 13% causing train users to dig deeper in to their pockets for their daily commute.
A spokesman for the Association of Train Operating Companies said: ‘We know times are tough for many people but these increases will ensure that Britain can continue investing in its railways.’
‘The squeeze designed in Downing Street will come to your street, to the high street, to every street up and down the country,’ said Mr Miliband.
But Chancellor George Osborne maintained: ‘VAT is a powerful weapon to tackle debt and if we don’t use it then the spending cuts would be over £13 billion bigger.’
Do you agree with the VAT increase? Will the rise in rail fares discourage you from using the trains? Let us know your thoughts by posting a comment below.
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