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?
Each year, the chancellor of the exchequer – who is in charge of the government’s finances – makes a Budget statement to MPs in the House of Commons.
It outlines the government’s plans for raising or lowering taxes. It also includes big decisions on what the government will spend money on.
The independent Office for Budget Responsibility (OBR) – which monitors government spending – will also publish a report on how the economy is doing.
When is the Budget?
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 lots of changes to tax rules. Some are designed to make it simpler, some designed to raise more money, and some are designed to influence behaviour.
For instance, the government has often put up tax on cigarettes to make it more expensive to smoke, and encourage people to quit.
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.
To close the gap between higher spending and less money, the government had to borrow.
In the year ending April 2021, the government borrowed £320bn – the highest figure seen outside wartime.
Economists expect it to borrow around £180bn more this year, another enormous sum.
During his Budget speech, the Chancellor will set out the latest borrowing forecasts for the years ahead.
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 parts of the Budget, such as defence spending, affect the whole of the UK.
Others, such as education, only affect England. This is because Scotland, Wales and Northern Ireland make their own decisions.
Scotland has income tax-raising powers, which means its rates differ from the rest of the UK. The Scottish government will publish its Budget on 9 December.