What is the Budget and when is it announced?

Before Keir Starmer had even secured his election victory, commentators were already speculating about when Labour’s first Budget would take place.

Upon winning the keys to 10 Downing Street, Starmer quickly appointed Rachel Reeves as the UK’s first female chancellor. She then set a date of 30 October, as speculation shifted to what measures the Budget might contain.

With the countdown to 30 October now firmly underway, we’ve addressed some Budget basics for those who are too embarrassed to ask. What exactly is a government Budget? What does it mean for your finances? And what time is it announced?

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It is worth brushing up on the basics before the event, as this fiscal statement promises to be an interesting one with significant implications for your personal finances. Not only is it Labour’s first Budget in over 14 years, it also comes at a challenging time after Reeves accused the Conservatives of leaving a £22 billion shortfall in the public finances.

Starmer recently warned that the upcoming fiscal statement would be “painful” leaving many worried that tax hikes are in store. This could include anything from a change in capital gains tax rates to the reduction of existing pension tax perks (such as the 25% tax-free pension cash).

Reports in recent days suggest Reeves is looking to find an extra £40bn going forward through tax hikes and spending cuts. This means that, despite being delivered on the eve of Halloween, the Budget is unlikely to contain much in the way of treats. Here’s everything you need to know.

What is a government Budget?

Each year, the chancellor of the exchequer sets out the government’s plans for the economy in a Budget statement. This includes everything from spending plans to how they will be funded through taxation.

“The Budget and the Finance Bill are usually annual events, in part because income tax and corporation tax are annual taxes which have to be renewed by legislation each year,” the government explains.

Despite this, it is not at all unusual for the government to deviate from this schedule. For example, the last fiscal statement was delivered on 6 March by former chancellor Jeremy Hunt. This Spring Budget, which contained measures like a 2p National Insurance cut, was seen by many as a last-ditch attempt to win voters around before a general election was called.

While Reeves has not yet delivered an official government Budget, she did outline some spending plans in a statement before the House of Commons on 29 July. As well as axeing the Winter Fuel Payment for all but the poorest pensioners, she cancelled some road and rail projects but announced a welcome pay rise for public sector workers.

Reeves hopes her initial cutbacks will deliver £5.5 billion of savings this year and £8.1 billion next year.

What time will Reeves deliver the Budget?

Reeves’s Budget speech on 30 October is likely to kick off at around 12:30 UK time, just after Prime Minister’s Questions.

Typically, each Budget is followed by four days of debate. The government explains: “Each day of debate covers a different policy area such as health, education and defence. The shadow chancellor makes their response the day after the Budget statement during the Budget debates.”

Some of the tax proposals put forward in the Budget will be approved almost immediately, while others will be agreed later. Some time after each Budget statement, the proposals are made legally binding through a Finance Bill.

The Finance Bill often acts as a motion of confidence in the government – if it cannot pass key measures in the bill, it could be at risk of collapse. “If the government cannot win a vote on such core parts of its agenda, it suggests that the Commons may not have confidence in the government as a whole,” says the Institute for Government, a British independent think tank.

Who is responsible for the Budget?

As chancellor of the exchequer, Reeves is responsible for the Budget. The Treasury is involved in the process too and will typically publish a report providing further detail on the measures announced after each fiscal event.

The Office for Budget Responsibility (OBR) plays a role too, as the chancellor’s Budget decisions are partly informed by data and analysis provided by this independent watchdog. Typically, the OBR publishes its economic and fiscal outlook on the same day as the Budget is delivered.

After each Budget statement, the Commons Treasury Select Committee (a cross-party committee) scrutinises it and provides a report. The government then produces a report in response to these findings.

When it comes to the Budget framework, Reeves has announced some changes in process this time around. Criticising the previous Conservative government in her July spending audit, she said: “The fiscal framework which I have inherited had several flaws… So I am announcing the most significant set of changes to our framework since the inception of the Office for Budget Responsibility, which will come into effect this autumn.

“First, we have introduced legislation to ensure every significant and permanent tax or spending announcement must be accompanied by an OBR forecast through our 'fiscal lock', so we can never again see a repeat of the mini-Budget.

“Second, we will require the Treasury to share with the Office for Budget Responsibility its assessment of immediate public spending pressures, and enshrine that rule in the Charter for Budget Responsibility, so no government can ever again cover up the true state of the public finances.”

Reeves also announced that departmental spending reviews would take place “every two years, with a minimum planning horizon of three years, to avoid uncertainty for departments and to bring stability to the public finances”.

How will Reeves’s Autumn Budget impact your finances?

The contents of the famous red box can have a big impact on your day-to-day life. The Budget determines the funding of public services, how much you pay in tax, and it also has a sizeable impact on the health of the overall economy.

You only need to look back to October 2022 and the ill-fated mini-Budget to see the consequences of getting it wrong. Gilt yields soared, the pound crashed, the Bank of England had to step in, and mortgage rates skyrocketed.

Labour has been clear that financial stability is a key priority, but gilt yields have been rising in recent weeks amid speculation that Reeves could change government borrowing rules to facilitate more investment in the UK economy.

Nigel Green, chief executive of the deVere Group, an independent financial organisation, says this shows investors are “offloading government debt” amid concerns the chancellor could “prioritise fiscal stimulus over long-term sustainability”.

Some households and businesses are also nervous about the prospect of higher taxes. The government has promised it won’t increase income tax, employee National Insurance contributions or VAT. However, other tax hikes are still on the table, including capital gains tax and inheritance tax.

Retirement taxes could also be tinkered with. For example, it is possible that Labour will reduce the amount of tax-free cash you are allowed to withdraw from your pension pot. Pension pots could also be brought inside the inheritance tax net.

It shouldn’t all be doom and gloom, though. Policies like ‘Freedom to Buy’ could make an appearance, after being introduced on the campaign trail. The party promised to help 80,000 people onto the property ladder over the next five years by making the current mortgage guarantee scheme permanent.

Reeves is also expected to confirm that the state pension will increase by 4.1% next year, equivalent to around £460 extra a year for recipients of the full new state pension. This comes after the government promised to retain the state pension triple lock, a measure which protects pensioners’ income against the corrosive effects of inflation.