The influences on Government Budget decisions

The influences on Government Budget decisions

July 21st 2014 3:25 pm

uk budget

How does the Government come up with the figures for new allowances, bands etc when delivering the annual UK Budget? We take a look.


Once a year, well twice if including the pre-Budget report (now called the ‘Autumn Statement’), the Government convenes to reveal it’s economic policies. Policies that ultimately oversee how much revenue is raised, through to the resulting expenditure.

These are important times and the budget system is at the heart of maintaining economic growth and making sure fiscal policies are manageable. Essentially the budget will end up affecting the lives of every UK citizen, some more so than others. It is salient that the decisions made for policy set out in the Budget report are well thought out and tested for impacts upon vulnerable parts of society.

People are able to test out the influence of budget changes almost immediately after the UK Budget is delivered – a rather chunky budget report is available at the Treasury website shortly after the Chancellor sits down. As is now custom every year, also provides a comprehensive financial implications ready-reckoner i.e a Budget Calculator. Individuals, or couples, can input important aspects of their lifestyles, including income, dependents, lifestyles and vehicles. The calculator takes this information and checks it against current and future legislation announced and marks out the financial differences.

So that, in a nutshell, is the UK Budget – but how are these decisions actually influenced? Where does the information come from within the report? To begin with, let’s take a look at the budget cycle – itself a four-stage process, but we will focus on the ‘Formulation’ stage – the part where the budget is put together.

Her Majesty’s Treasury (HM Treasury) is responsible for developing the Government’s finance and economic policy. It is called the Exchequer and the Chancellor of the Exchequer is currently George Osborne – also the MP who delivers the budget speech. It is this ministerial department that makes the decisions and then is responsible for delivering the policy.

Key responsibilities include:

  • Public Spending
  • Financial Services Policy
  • Control of the UK tax system
  • Delivery of public sector UK infrastructure projects
  • Facilitating private investment into UK infrastructure
  • Achieving strong and sustainable economic growth

Itself supported by seven other agencies and public bodies, including the Office for Budget Responsibility (OBR), which provides the data to back up most decisions, the Treasury monitors economic indicators and marks out where adjustments are required.

The creation, or amendment, of existing policy is used to tweak and guide these economic indicators to tow the path set out in the key responsibilities, but are mainly to sustain economic growth.

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The 2012 - 2024 Budget proposals and other tax changes are summarised here and available at the blog.

The proposals could change before coming into force. The calculator and any associated information are intended to provide a loose overview and therefore include assumptions and estimates. It should not be used as a foundation for checking liability to tax or when deciding investment strategies.

Although we have tried very hard to provide accurate and current figures, there is no guarantee that this information is accurate as of the date it is received or that it will continue to be accurate. You should not act upon such information without first taking professional advice and going through your circumstances in detail.