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Budget 2021: What is it and when will it happen?

ART GALLERY

On Wednesday, Chancellor Rishi Sunak will announce how much of our money he will take in taxes, and what he will spend it on – including health, schools, police and other public services.

The Budget will be the second of the year, and will affect the lives of everyone in the years ahead.

What is the Budget?

The chancellor of the exchequer, who is in charge of the government’s finances, delivers a Budget statement to MPs in the House of Commons each year.

It outlines the government’s plans for tax increases or decreases. It also includes major decisions about how the government will spend its money.

The independent Office for Budget Responsibility (OBR), which monitors government spending, will also issue a report on the state of the economy.

When is the Budget?

The Budget speech will be delivered on Wednesday 27 October.

It usually starts at about 12:30 UK time and lasts about an hour. Labour leader Sir Keir Starmer gives his response straight afterwards.

This year’s Autumn Budget is unusual for two reasons:

  • It’s the second budget of the year – there was a Budget in March too
  • It comes on the same day as the results of a Spending Review, which details how government will fund public services for the next three years

What could be in the Budget?

The Budget is likely to include help to support businesses and individuals recover from the economic effects of Covid.

It will also set out some detail on how it will achieve some of its longer-term objectives, such as:

  • Reducing the UK’s net greenhouse emissions to zero by 2050 to combat climate change
  • Levelling up – bringing jobs and investment to the poorer regions of the UK

The Budget will also include a slew of tax changes. Some are intended to make things easier, others to raise more money, and still others to influence behaviour.

For example, the government has frequently increased cigarette taxes in order to make smoking more expensive and encourage people to quit.

Though many businesses are open again, the impact of the pandemic on government finances will last for years

How much did the government spend fighting Covid-19?

Measures such as the furlough scheme – which finished at the end of September – were expensive, and government income is down because it has collected less money in tax during the pandemic.

The government had to borrow to bridge the gap between higher spending and less money.

The government borrowed £320 billion in the fiscal year ending April 2021, the highest figure seen outside of wartime.

Economists predict that it will borrow another £180 billion this year.

During his Budget speech, the Chancellor will present the most recent borrowing forecasts for the coming years.

Will taxes go up or down in the Autumn Budget?

The government needs to cut the gap between what it spends and what it raises, so it may look to raise more taxes.

One major tax rise was announced in September – the £12bn Health and Social Care Levy. This broke a promise the Conservatives made at the last election, not to raise the three biggest taxes – income tax, national insurance and VAT.

There has been speculation that graduates may be asked to start paying back student loans earlier.

At the same time, the cost of living is rising. So the chancellor may want to cut some taxes, such as the amount of VAT pay on energy bills.

The chancellor is expected to announce major changes to the complicated alcohol tax system, which could see sparkling wine become cheaper.

Will spending be cut 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 government and transport, are braced for cuts to their day-to-day budgets next year.

They have already faced a decade of tight spending, and making further cuts will be painful.

Does the Budget affect all parts of the UK?

Some aspects of the Budget, such as defence spending, have an impact on the entire United Kingdom.

Others, such as education, are limited to England. This is due to the fact that Scotland, Wales, and Northern Ireland make their own decisions.

Scotland has the authority to levy income taxes, so its rates differ from those in the rest of the United Kingdom. On December 9, the Scottish government will release its budget.

If the government announces extra spending on areas that only affect England, the other nations get an equivalent extra sum of money to spend as they choose, according to a rule called the Barnett formula.

SourceBBC
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