This year’s budget will be watched very closely, due to the massive economic effects of Covid.
Chancellor Rishi Sunak’s choices will shape UK finances.
What’s the budget?
Each year, the Chancellor of the Treasury – the government’s chief finance minister – reports the budget to members of the House of Commons.
It describes the state of the economy and the government’s plans to raise or lower taxes. It also includes big decisions about government spending.
The budget also includes forecasts on the future performance of the UK economy.
When is it?
This year’s budget speech will be delivered on Wednesday, March 3.
It usually starts around 12:30 p.m. GMT and lasts about an hour.
Labor leader Sir Keir Starmer gives his answer immediately after. Then, the deputies debate the budget and the budget bill, which concretizes the chancellor’s proposals.
What could the budget contain?
The government says it will define “the next phase of the plan to fight the virus and protect jobs.”
The Chancellor is under pressure to address two main issues:
- Will the UK start repaying the huge debts accumulated during the pandemic?
- How the government will support the hardest hit people and businesses
How much money has the government borrowed?
The latest figures are mind-boggling.
Government loan for this fiscal year has reached Â£ 271 billion. It was Â£ 222 billion over a year ago.
What is a trillion worth?
Millions, billions of billions …
As the numbers get bigger and bigger, words can start to sound the same.
But a billion is a thousand times greater than a million. And a trillion is a thousand times greater than a billion.
To put that in perspective, if a million seconds adds up to 11 and a half days, a billion seconds adds up to 33 and a half years – and a trillion seconds? Over 33,000 years old.
A lot, in other words. But in a modern economy, we spend a lot.
If you take the total amount spent on healthcare in the UK, it would take less than five years (according to the Office for National Statistics) to spend Â£ 1 billion.
Alternatively, Â£ 1 billion could buy you over four million homes at the average UK house price, or fund over 500 NASA missions to Mars.
Could taxes be increased?
The government can raise money by raising taxes. The three main ones are:
- Income tax on income, which is usually taken from your salary before you receive it
- Social contributions, another income tax – paid by workers and employers – originally designed to fund benefits such as state pensions
- VAT – a tax added to the price of many goods and services
Before the 2019 election, the Conservative Party said it would not increase these taxes.
But that was before the pandemic and the Chancellor could say circumstances had changed.
Some say tax increases are needed and should be introduced quickly. Others say there is no need to act now because the cost of borrowing is cheap and the economy is fragile.
Other measures could include a reduction in public spending. Mr. Sunak has already frozen the wages of at least 1.3 million public sector workers.
What about other temporary support measures?
The government has already confirmed this will expand the leave program – where the government helps companies pay workers’ salaries rather than sacking them – until September 2021.
The government is still under pressure to extend the weekly Â£ 20 increase to universal credit, which was introduced to support low-income families during the pandemic, but which is due to end on March 31.
There are also calls to maintain the stamp duty holiday in England and Northern Ireland. This was designed to stimulate the housing market.
What about the cost of cigarettes and alcohol?
The Chancellor sets the so-called “taxes for sin” on cigarettes and alcohol.
Any change in these functions will take effect almost immediately – although pubs may still be closed.
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. Its budget is delivered on January 28.
Wales also controls some income tax, but ministers have decided to stick to the main UK levels.
In Northern Ireland, the Assembly has less control over taxes.