Chancellor of the Exchequer, Rishi Sunak outside 11 Downing Street, London, before heading to the House of Commons to deliver his Budget. Picture date: Wednesday March 3, 2021.
07 April 2011 12:00 AM

The Budget

07 April 2011

What is the Budget?

The Budget is the government of the day’s main set-piece economic event. It comprises two key elements: the Chancellor’s Budget speech to the House of Commons and the publication of the government’s detailed financial reports.

This second element is formally called the Financial Statement and Budget Report (FSBR), but is colloquially known as the Red Book or the Budget Report.

Legally, the government of the day is bound to present to Parliament two economic forecasts a year.

Since 1997, this has first consisted of an Autumn Pre-Budget Report. This provides a progress report of the economy, alongside setting out the direction of the government’s economic policy. Secondly, the actual Budget, normally presented in the Spring, focuses more heavily on regulatory or taxation changes.

Prior to 1998, detailed spending plans used to be contained within the government’s second financial statement, not the Budget. But since Gordon Brown’s chancellorship these have been contained within a separate Comprehensive Spending Review (CSR). This allocates money to individual departments and objectives. Many major announcements are though still reserved for the Budget proper.

The Chancellor’s original red box was retired in 2010 after 150 years, by George Osborne.

Budget day

The Budget is one of the oldest political events in the calendar and can be traced back hundreds of years. It is the device by which money is formally raised for government spending.

Proposals contained within the Budget statement have to be authorised by Parliament, in the form of the subsequent Finance Bill, before they can come into force. However in light of the Provisional Collection of Taxes Act 1968, some changes in duties, for example vehicle excise duty, can take effect immediately from the Chancellor’s announcement.

Indirect taxes (such as VAT) are permanent, whereas direct taxes (such as income tax) are annual and have to be renewed by Parliament each year.

There is a significant amount of ritual attached to the delivery of the Budget, beginning with a morning photo-call outside Number 11 Downing Street during which the Chancellor holds up the ‘Budget Box’. This red leather box is used by Chancellors to carry their budget papers to the House of Commons and the first such box is believed to have been made for Gladstone in 1860.

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