On October 27, the Chancellor will announce how much of our money he will take in taxes and what he will spend it on – health, schools, police and other public services.
The budget will be the second of the year and will affect the lives of every citizen in the years to come.
What is the Budget?
Each year, the Chancellor of the Exchequer – who is in charge of government finances – makes a budget statement to members of the House of Commons.
It describes the government’s plans to raise or lower taxes. It also includes big decisions about government spending.
The independent Office for Budget Responsibility (OBR) – which monitors government spending – will also publish a report on economic developments.
When will the budget be?
The budget speech will be delivered on Wednesday October 27.
It usually starts around 12:30 p.m. UK time and takes about an hour. Labor leader Sir Keir Starmer gives his answer shortly after.
This year’s fall budget is unusual for two reasons:
This is the second budget of the year – there was a budget in March too
It comes the same day as the results of an expenditure review, which details how the government will fund public services for the next three years.
What could be in the budget?
The budget should include aid to help businesses and individuals recover from the economic effects of Covid.
He will also detail how he will achieve some of his longer term goals, such as:
The budget will also include many changes to the tax rules. Some are designed to make things easier, others to raise more money, and still others to influence behavior.
For example, the government has often imposed a tax on cigarettes to increase the price of cigarettes and encourage people to quit smoking.
How much has the government spent to fight Covid-19?
Measures such as the leave scheme – which ended in late September – were costly and government revenues are falling as it collected fewer taxes during the pandemic.
To bridge the gap between more spending and less money, the government had to borrow.
In the year ending April 2021, the government borrowed Â£ 320 billion – the highest figure ever seen outside of wartime.
Economists expect him to borrow around Â£ 180bn more this year, another huge sum.
In his budget speech, the Chancellor will present the latest borrowing forecasts for the coming years.
Will taxes go up or down in the fall budget?
The government needs to close the gap between what it spends and what it increases, so that it may seek to raise more taxes.
A major tax increase was announced in September – the Â£ 12 billion tax on health and social care. It broke a promise made by the Conservatives in the last election not to increase the three biggest taxes – income tax, national insurance and VAT.
There has been speculation that graduates may be asked to start paying off student loans sooner.
At the same time, the cost of living is increasing. So the Chancellor may want to reduce some taxes, such as the amount of VAT paid on energy bills.
The Chancellor is expected to announce major changes to the complicated alcohol tax system, which could lower the price of sparkling wine.
Will expenses be reduced in the budget?
Overall government spending will rise next year, with big increases already announced for health and schools in England.
But other departments, such as courts, prisons, local authorities and transport, are bracing for cuts in their daily budgets next year.
They have already faced a decade of tight spending, and further cuts will be painful.
Does the budget affect all parts of the UK?
Parts of the budget, such as defense spending, affect the whole of the UK.
Others, like education, only affect England. This is because Scotland, Wales and Northern Ireland make their own decisions.
Scotland has income tax powers, which means its rates differ from the rest of the UK. The Scottish government will release its budget on December 9.
If the government announces additional spending in areas that only affect England, the other nations are given an equivalent amount of additional money to spend as they see fit, according to a rule called Barnett’s formula.