EACH year, the Chancellor of the Exchequer makes an announcement on the UK’s finances, known as the Budget. Just like you might negotiate how much pocket money you get and decide how to spend it, the Chancellor announces how the Government will collect money from taxes and how much will be spent on public services like schools, hospitals, police and the armed forces.
The current Chancellor, Rishi Sunak, delivered his 2021 Budget speech to Parliament on 3 March. This year’s Budget is particularly important because the Government has spent a lot of extra money helping people and businesses during the COVID-19 pandemic. People wanted to know whether the support will continue over the next few months while many businesses remain closed and some people can’t work, and whether the Chancellor will increase taxes to pay for the extra spending.
The Chancellor explained that, like most countries in the world, the UK has been badly affected by the COVID-19 pandemic. Over 700,000 people have lost their jobs since last March and the UK economy was 10% smaller in 2020 than it was in 2019 – the biggest fall in 300 years.
How much money does the government spend?
Over the next year, the Government will collect £820 billion in taxes from people and businesses, and spend £1,053 billion on public services. It’s hard to imagine this much money. If you stack £10 notes on their side next to each other, £1 million pounds would make a stack 10m long – the length of a bus.
£1 billion would be 10km long, which would take about two hours to walk. £1,053 billion would reach all the way from the UK to Japan! The Government plans to spend more than it will collect in taxes, so it will need to borrow the rest. The last time the UK borrowed this much money was during World War Two.
What will the Chancellor do this year?
The Chancellor explained his plan to help the UK recover from the COVID-19 pandemic:
- The Government will carry on helping businesses and families until September.
- The Chancellor will raise more money from taxes to start paying back the money the Government borrowed. He said that people and businesses who can afford it will be asked to pay more.
- The Chancellor said he wants to start planning for the future by helping businesses reopen safely after lockdown, helping people to learn new skills, creating new jobs in the UK and helping businesses to grow.
What was in the Budget for young people?
The Government will spend an extra £700 million helping children catch up on things they missed while schools were closed. Some of the money will be used for summer schools. The Government will spend extra money on sports, TV and film, theatres and museums, plus a bid to bring the FIFA World Cup to the UK and Ireland in 2030.
The Chancellor said he wants to improve the environment and announced investment in green energy. What would you do if you were Chancellor? Think about the things that are most important to you. Maybe you’d spend more money on schools and sports facilities, or use taxes to encourage people to be more environmentally friendly.