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The Treasury is legally bound to present two economic forecasts per year. Between 1993 and the 1997 election, this was done in the Budget which was held in November and the Summer Economic Forecast (late June/early July).
Since May 1997, under the new government, the Chancellor presents a Budget in the Spring but also presents a Pre-Budget Report in the Autumn which provides a progress report on what has been achieved so far, gives an update on the state of the economy and the Government finances and sets out the direction of Government policy in the run up to the Spring Budget.
The first ever Pre-Budget report took place on 26 November 1997. The aim was to begin a national debate on the major economic issues facing Britain. Ministers held a series of 'roadshows' around the country as part of this debate which helped to inform decisions in the Spring 1998 Budget.
The origins of the Exchequer go back to the Norman period. The Norman system was based on two departments to deal with finance: the first, the Treasury, received and paid out money on behalf of the monarch; the second, the Exchequer, had a 'lower office' connected with the Treasury which received money, and it had an 'upper office', a court of law concerned with regulating the Kings accounts. The word 'exchequer' comes from the Latin 'scaccarium' meaning a chessboard. The name was given to the court because counters were moved on a square table. The word 'budget' comes from an old French word 'bougette' which mean little bag.
There is normally a photo-call on the steps of Number 11 Downing Street with the Chancellor holding up the 'Budget Box'. The box, in which successive Chancellors have carried their Budget speech from Number 11 to the House, is believed to have been made for Mr Gladstone, around 1860. It is a wooden box, lined in black and covered in Scarlet leather. Lord Callaghan, when Chancellor in 1965, was the first Chancellor to break tradition and use a newer box - but later Chancellors' reverted to using what has become known as the 'Gladstone box'.
In July 1997, Chancellor Gordon Brown became the second Chancellor to break with tradition and use a new box for the Budget. Made by industrial trainees at Babcock Rosyth Defence ltd ship and submarine dockyard in Fife, the new box is made of yellow pine, with a brass handle and lock, covered in scarlet leather, embossed with the Royal initials and crest and the Chancellor's title. Mr Brown shared his photo-call with four trainees from the dockyard. There was an additional break from tradition in 1997 when the Chancellor and his Ministerial team enjoyed the first ever Budget day breakfast at the Chancellor's flat in Number 10.
Budget speeches normally kick off at around 3.30pm. Speeches in the past lasted anything from three quarters of an hour to a couple of hours. The longest Budget speech is believed to have been by William Gladstone on 18 April 1853, lasting four hours and forty five minutes. Benjamin Disraeli is said to hold the record for brevity, at forty five minutes on 4 April 1867. Gordon Brown's speech in July 1997 lasted for one hour, in 1998 and 1999 it lasted for just under one hour.
As soon as the Chancellor returns to his seat, information is made available to Members of Parliament, the public and the press. Details of the Budget measures are generally contained in a large number of press notices. In March 1999, for example, there were 63 press notices.
Chancellors by tradition may refresh themselves with alcoholic drink during Budget speeches. This privilege does not extend to any other Member or to any other occasion. Not all Chancellors have availed themselves of this concession, relying instead on non-intoxicating liquid refreshment. Gordon Brown has chosen Scottish water at his 3 Budgets so far.
The Chancellor of the Exchequer traditionally makes a Budget Day broadcast to the nation during the evening of Budget Day. The broadcast provides the Chancellor with a further opportunity to outline the intentions and ideas behind his Budget to the public. The Opposition Parties have an opportunity to respond in their own Budget broadcasts during Budget week.
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Annual and permanent taxes
Most UK taxes, including all indirect taxes, petroleum revenue tax and taxes on capital are 'permanent'. On the other hand, income tax, corporation tax and advanced corporation tax are annual taxes and must be renewed each year. This annual review of certain taxes gives the House of Commons the opportunity to review the imposition of these taxes.
If annual taxes are reimposed as a whole, their detailed provisions, with a couple of exceptions, remain as they were in the previous year. The first and very important exception concerns the indexation of personal allowances and rate bands for income tax; this is discussed in more detail below. The second exception is that the ceiling on relief for mortgage interest payments needs to be fixed each year.
Legislative process
The reimposition of annual taxes, and most other tax changes announced in the Budget are legislated in the annual Finance Bill. This is normally published in early January and is considered by Parliament in the Spring, with Royal Assent being given by the start of May.
One of the key features of tax legislation, which distinguishes it from any other legislation, is that measures announced in the Budget may take effect before the Finance Bill is enacted. The approval of Budget Resolutions permits this to take place.
The Budget resolutions are tabled as soon as the Chancellor has finished the Budget speech. Under the Provisional Collection of Taxes Act 1968, these resolutions, once passed by the House of Commons, authorise the imposition of certain taxes or of changes in their rates. Under the Unified Budget procedures, there is also a resolution (unconnected to the Finance Bill) which welcomes the Budget spending plans.
Rules for tax changes
All tax changes that are to be enacted in the Finance Bill have to be covered by resolutions. Some changes, such as those that increase or extend a tax, take away or reduce an existing relief, or are to have immediate effect need specific resolutions. Other changes can be covered by a more general resolution known as the Amendment Law Resolution. The Amendment Law Resolution is generally the first resolution in the list tabled at the end of the Budget speech and is the formal subject of the Budget debate. Only the Government can move an increase in taxes. This is because the right to impose taxes derives from the Crown's right to demand revenue (or supply); a demand which can only be expressed through the Government of the day.
There is another general resolution known as the Incidental Charges Resolution. This covers situations where the complexities of the tax system mean than an increase income tax relief can, in some circumstances, lead to taxpayers having to pay more on a different tax, even though their overall tax bill is not going up.
Immediate tax changes
The Budget resolutions are tabled at the end of the Chancellor's statement and they are voted on at the end of the Budget debate. If passed they can then take effect. In recent years the Budget debate has lasted for five days. To cover the intervening period, a Resolution under Section 5 of the Provisional Collection of Taxes Act can be moved immediately the Chancellor finishes speaking. This Resolution cannot be debated or amended and, if approved by the House, gives authority for specified changes to have immediate effect pending the passage of the main Resolutions. The effect of such a Resolution lapses if the main Resolution, to which it gives effect, is not passed within ten sitting days. Under the procedures for Autumn Budgets the changes on excise duties often take effect from 6pm on Budget Day, but sometimes a later implementation date is chosen.
Time limit on main Resolutions
Furthermore, the main Resolutions themselves are temporary; the changes to which they give effect are nullified if the Finance Bill does not receive a second reading within 30 sitting days of the Resolutions being passed, or if the Bill does not receive Assent within a certain period. The 30 sitting days period was set in the 1993 Finance Act; previously it was 25 days. The deadline for Royal Assent to the Finance Act is 5 May for an Autumn Budget (for a March/April Budget it had been 5 August). The Resolutions also lapse if Parliament is dissolved or prorogued.
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