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Case Study – All about the UK Budget

The word Budget comes from an old French word ‘bougette’ meaning little bag.

It was customary to bring the statement on financial policy to the House of Commons in a leather bag. The modern equivalent of the bag is the red despatch box or Budget box.

The distinctive red Budget Box which Chancellors used to carry their speech from 11 Downing Street to the House of Commons was in use for over one hundred consecutive years.

The wooden box was hand-crafted for William Ewart Gladstone around 1860. It was lined with black satin and covered with scarlet leather.

Lord Callaghan was the first Chancellor to break with tradition in 1965 when he used a new box.  In July 1997 Gordon Brown became the second Chancellor to use a new box for the Budget.

George Osborne used the Gladstone Box for his first Budget in 2010 but used a new box in 2011.

Traditionally the Chancellor is photographed on Budget day on the steps of 11 Downing Street, the official residence of the Chancellor of the Exchequer, holding up the Budget Box.

Despatch box drinks

By tradition, the Chancellor, unlike Ministers at the despatch box at any other time of the year, may drink alcohol during the Budget Speech if they wish.

Former Chancellor George Osborne chose to drink mineral water. Oher Chancellors have chosen mineral water (Gordon Brown and Alastair Darling), whisky (Kenneth Clarke), spritzer (Nigel Lawson), gin and tonic (Geoffrey Howe), brandy and water (Benjamin Disraeli) and sherry and beaten egg (William Ewart Gladstone).

What is the Budget?

Each year the Chancellor of the Exchequer makes the Budget statement to the House of Commons outlining the state of the economy and the Government’s proposals for changes to taxation.

The House of Commons debates the Budget and scrutinises the subsequent Finance Bill, which enacts the Chancellor’s proposals.

The Budget, or Financial Statement, is a statement made to the House of Commons by the Chancellor of the Exchequer on the nation’s finances and the Government’s proposals for changes to taxation. The Budget also includes forecasts for the economy by the Office for Budget Responsibility (OBR).

Changes made in 2016

In the 2016 Autumn Statement it was announced that, following the 2017 Spring Budget, Budgets will be delivered in the Autumn rather than in March or April of each year.

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

By contrast, most UK taxes including all indirect taxes, petroleum revenue tax and taxes on capital are ‘permanent’.

In election years, after a change of Government, a Budget will usually be introduced by the incoming Chancellor of the Exchequer, even if the outgoing Chancellor has already delivered one.

What happens in Parliament?

The Chancellor of the Exchequer delivers his Budget statement to Members of Parliament in the House of Commons.

The first part of the statement typically begins with a review of the nation’s finances and the economic situation. The statement then moves on to proposals for taxation.

Provisional collection of taxes

Some measures, such as any changes to the rates of duty on alcohol and tobacco, come into effect on Budget day or soon after.

The power to make these changes on an interim basis, before the Finance Bill is passed, comes from the House of Commons approving a motion for the provisional collection of these taxes.

After the Chancellor finishes his speech but before the Leader of the Opposition responds, the Chairman of Ways and Means puts a single motion to the Commons asking for agreement to these changes.

This is called the ‘Provisional Collection of Taxes’ and is by convention agreed to by the House, meaning that the changes can come into effect at 6pm on Budget day.

Debates on the Budget Resolutions

Traditionally the Leader of the Opposition, currently Labour Leader Jeremy Corbyn, rather than the Shadow Chancellor replies to the Budget Speech.

The Budget is usually followed by four days of debate on the Budget Resolutions, these are the tax measures announced in the Budget.

Each day of debate covers a different policy area such as health, education and defence. The Shadow Chancellor makes his response the day after the Budget statement during the Budget debates.

Budget Resolutions can come into effect immediately if the House of Commons agrees to them at the end of the four days of debate but they require the Finance Bill to give them permanent legal effect.

The Finance Bill

A new Finance Bill is presented to Parliament each year, it enacts the proposals for taxation made by the Chancellor of the Exchequer in his Budget statement and brings them into law.

Once the House of Commons has agreed the Budget Resolutions, the Finance Bill starts its passage through Parliament in the same way as any other bill.

The House of Lords has a limited role in respect of Finance Bills.

The House of Commons has the sole right to initiate and amend bills whose main purpose is to levy taxes or authorise expenditure.

The House of Lords will have a second reading debate on the Finance Bill but they will not consider the Bill clause by clause and will not amend the Bill.

Scrutiny of the Budget by Committees

The Commons Treasury Select Committee is a cross-party committee of MPs whose role is to scrutinise the work of the Treasury.

Following each Budget statement the Treasury Committee conducts an inquiry into the Government’s proposals, gathering evidence from expert witnesses and publishing a report with its conclusions and recommendations.

The Government then produces a report in response to the Committee’s findings, often with a contribution from the Office for Budget Responsibility (OBR).

The House of Lords Economic Affairs Sub-Committee examines selected aspects of the Finance Bill, including tax administration, clarification and simplification.

Why doesn’t the Speaker chair the Budget debate?

Traditionally, the Chairman of Ways and Means (Deputy Speaker) chairs the Budget debates rather than the Speaker.

History and traditions of the Budget

Is the Budget always delivered on the same day of the week?

The Budget often takes place on a Wednesday after Prime Ministers’ Questions but it can take place on any day of the week.

Longest and shortest Budget Speeches

The longest continuous Budget speech was by William Gladstone on 18 April 1853, lasting 4 hours and 45 minutes. Benjamin Disraeli’s speech in 1852 lasted 5 hours but included a break.

Benjamin Disraeli’s 1867 Budget Speech lasted only 45 Minutes.

With twelve Budget speeches, William Ewart Gladstone holds the record for delivering more Budget speeches than any other Chancellor of the Exchequer.

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