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

  • In Business
  • 2021-02-26 09:35:05Z
  • By BBC
UK Chancellor Rishi Sunak
UK Chancellor Rishi Sunak  

This year's Budget will be very closely watched, because of the massive economic effects of Covid.

The choices Chancellor Rishi Sunak makes will shape the finances of the UK.

What is the Budget?

Each year, the chancellor of the exchequer - the government's chief finance minister - makes a Budget statement to MPs in the House of Commons.

It outlines the state of the economy and the government's plans for raising or lowering taxes. It also includes big decisions on what the government will spend money on.

The Budget also includes forecasts for how the UK economy could perform in future.

When is it?

This year's Budget speech will be delivered on Wednesday 3 March.

It usually starts at about 12:30 GMT and lasts around an hour.

Labour leader Sir Keir Starmer gives his response straight afterwards. Then MPs debate the Budget and the Finance Bill, which puts the chancellor's proposals into law.

What could be in the Budget?

The government says it will set out "the next phase of the plan to tackle the virus and protect jobs".

The chancellor is under pressure to address two main issues:

  • Whether the UK will begin paying off the huge debts built up during the pandemic

  • How the government will support the people and businesses hit the hardest

How much money has the government borrowed?

The latest figures are eye-watering.

Government borrowing for this financial year has reached £271bn. That's £222bn more than a year ago.

This has pushed up the national debt to £2.13 trillion. That's more than 99% of GDP - the value of goods and services produced by the UK. That has not happened since the early 1960s.

Borrowing by month bar chart
Borrowing by month bar chart  

Could taxes be raised?

The government can raise money by increasing taxes. The three main ones are:

  • Income tax on earnings, usually taken from your pay before you receive it

  • National Insurance Contributions, another tax on earnings - paid by workers and employers - originally designed to finance benefits such as the state pension

  • 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 this was before the pandemic and the chancellor could argue circumstances have changed.

Some people say tax rises 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 cut in government spending. Mr Sunak has already frozen pay for at least 1.3 million public sector workers.

Chart: How UK taxes were collected, 2019/20
Chart: How UK taxes were collected, 2019/20  

What about other temporary support measures?

The government is under pressure to extend the £20 weekly increase to universal credit, which was introduced to support low-income families during the pandemic, but is due to end on 31 March.

There are calls to extend furlough - where the government helps companies pay employees' wages rather than lay them off - and to offer more help to self-employed people who have missed out on support during the pandemic.

There are also calls to keep the stamp duty holiday in England and Northern Ireland. This was designed to boost the housing market.

  • What is universal credit and what else can I claim?

  • Can I go on furlough to look after my children?

  • When does the stamp duty holiday end?

What about the cost of cigarettes and alcohol?

The chancellor sets the so-called "sin taxes" on cigarettes and booze.

Any change in these duties will come into effect almost immediately - although pubs may still be shut.

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. Its Budget is delivered on 28 January.

Wales controls some income tax too, but ministers have decided keep to the main UK levels.

In Northern Ireland, the Assembly has less control over taxes.


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