By Kevin Peachey
Personal finance correspondent, BBC News
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This year’s budget is being watched very closely due to the massive economic impact of Covid.
The decisions that Chancellor Rishi Sunak makes will shape the UK’s finances.
What is the budget?
Every year the Chancellor of the Exchequer – the government’s chief financial officer – issues a budget declaration to the MPs in the lower house.
It describes the economic climate and the government’s plans to increase or decrease taxes. It also contains important decisions about what the government will spend money on.
The budget also includes projections of how the UK economy might develop in the future.
When is it?
This year’s budget speech will be given on Wednesday 3rd March.
It usually starts around 12:30 GMT and lasts about an hour.
Union leader Sir Keir Starmer gave his answer immediately afterwards. Then the MPs debate the budget and the finance law, which translates the Chancellor’s proposals into law.
What could be in the budget?
The government says it will set “the next phase of the plan to fight the virus and protect jobs”.
The Chancellor is under pressure to address two main issues:
- Whether the UK will start paying off the huge debts it incurred during the pandemic
- How the government will support people and businesses is hardest hit
How much money did the government borrow?
The latest numbers are staggering.
Government borrowing for this financial year has reached £ 271 billion. That’s £ 222 billion more than a year ago.
What’s a trillion worth?
Millions, billions, trillions …
As the numbers keep getting bigger, the words can sound the same.
But a billion is a thousand times bigger than a million. And a trillion is a thousand times bigger than a billion.
To put this in perspective: if one million seconds add up to 11.5 days, one billion seconds add up to 33.5 years – and a trillion seconds? More than 33,000 years.
In other words, a lot. But in a modern economy we spend a lot.
If you were to spend all of that money on healthcare in the UK it would take less than five years (according to the Bureau of National Statistics) to spend £ 1 billion.
Alternatively, you could use £ 1 billion to buy more than four million homes for the average UK house price, or to fund more than 500 NASA missions to Mars.
Could taxes be levied?
The government can raise money by raising taxes. The three most important are:
- Income tax on income, which is usually deducted from your salary before you receive it
- Social Security Contributions, another income tax paid by employees and employers that was originally intended to fund benefits such as the state pension
- Value Added Tax – a tax that is added to the price of many goods and services
Ahead of the 2019 elections, the Conservative Party said it would not raise these taxes.
However, it did so before the pandemic and the Chancellor could argue that circumstances have changed.
Some people say that tax increases are necessary and should be implemented 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 cutting government spending. Mr. Sunak has already frozen wages for at least 1.3 million public sector workers.
What about other temporary support measures?
The government has already confirmed it will extend the vacation program – where the government helps companies pay workers’ wages instead of firing them – by September 2021.
The government is still under pressure to extend the £ 20 weekly hike to universal loans, which were introduced to help low-income families during the pandemic but are set to end on March 31st.
There are also calls to maintain stamp duty leave in England and Northern Ireland. This should boost the real estate market.
What about the cost of cigarettes and alcohol?
The Chancellor sets the so-called “sin taxes” on cigarettes and alcohol.
Any change to these obligations will take effect almost immediately – although the pubs may still be closed.
Does the budget cover all parts of the UK?
Some parts of the household, such as B. Defense spending affects the whole of Great Britain.
Others, like education, concern England only. This is because Scotland, Wales and Northern Ireland make their own choices.
Scotland has powers to increase income tax, which means its tax rates are different from the rest of the UK. The budget will be delivered on January 28th.
Wales also controls some income taxes, but ministers have chosen to stick to the main British levels.
In Northern Ireland the Assembly has less control over taxes.