Explaining the budget process

In summary

• The government has committed to holding one “fiscal event” a year, making the Autumn Budget 2025 the key date in the UK’s economic calendar 
• Rachel Reeves has insisted she will keep to “iron-clad” fiscal rules that include moving the current Budget into balance by 2030 
• With independent forecasts that the government is on track to break this rule, many think tax rises are coming 

The Autumn Budget is the key date in the UK’s economic calendar. Past governments often had two major fiscal statements setting out their spending, tax and economic policies for the coming months and years: An annual Budget in the spring and a second statement in the autumn, which could also introduce significant changes.  

From 2017, however, the then Chancellor Philip Hammond moved to a single UK Budget in the Autumn – one “fiscal event” each year and a new timetable for economic policy making:  

• Tax and spending policies announced in the Autumn Budget  
• Consultation on the changes over the winter and spring 
• Draft legislation published in July for technical consultation  
• A finance bill introduced in the autumn

Under the new regime, the Spring Statement remained, but no longer as a “fiscal event” to include significant tax and spending decisions. Instead, the statement serves as an opportunity for the Chancellor to present an update on economic forecasts and the government's financial plans. 

Despite this, as the House of Commons library notes, there have been deviations from this schedule – not least during the Covid 19 pandemic. This saw the November 2019 Budget postponed until March 2020, three economic statements made during that year, and the Autumn Budget delayed until March 2021.  

Following the 2024 election that swept Labour to power, a Treasury policy paper confirmed it would stick to just a single annual Budget: “To support economic stability, the government is committed to one major fiscal event a year, giving families and business due notice of tax and spending changes.” 

To date, the new Chancellor, Rachel Reeves, has largely kept to this. The Autumn Budget 2024 saw significant changes to employers’ national insurance contributions, business property relief (BPR) and agricultural property relief (APR), capital gains tax, business rates, environmental taxes and the non doms tax regime, among others. 

By contrast, the Spring Statement contained no further tax increases, with Reeves reiterating the government’s commitment to “deliver just one major fiscal event a year”. Meanwhile, draft clauses for the forthcoming finance bill were published in July, in line with the expected schedule.    

Despite the lack of tax changes in the Spring Statement, however, Reeves was forced to announce cuts to spending plans due to a forecast downgrade by the Office of Budget Responsibility (OBR).  

The Office of Budget Responsibility (OBR) was established in 2010 to provide independent economic forecasts and analysis of the public finances. Its forecasts of expected tax revenue, spending and economic growth are published twice a year to coincide with the Spring Statement and Autumn Budget.  

A key purpose of the OBR forecasts is to assess whether the government is on track to meet its fiscal rules. These rules are the government’s self-imposed constraints on its tax and spending decisions. They are designed to promote responsible and sustainable policy, discouraging short-term decisions, such as spending sprees and tax cuts in the run-up to elections.  

Rachel Reeves set out the new government’s fiscal rules in the Autumn Budget 2024:  

• The Stability Rule to move the current Budget into balance, so day-to-day spending is met by revenues, and the government will only borrow for investment 
• The Investment Rule to reduce net financial debt (public sector net financial liabilities) as a proportion of GDP 

The rules must be met by 2029-30, until that year becomes the third year of the forecast, at which point both rules will target the third year of the rolling forecast period. The Labour manifesto before the 2024 election stated that its fiscal rules would be “non-negotiable” and Reeves has said that the rules are “iron-clad”. 

It was the OBR’s revised forecast that the government would not meet the rules that prompted the spending cuts in the Spring Statement. These cuts aimed to restore the estimated £9.9 billion “fiscal headroom” that the revised forecast had reduced: The scope the Chancellor has to increase spending or cut taxes without breaking the fiscal rules.  

The rules and declining fiscal headroom suggest significant tax rises, spending cuts or both face businesses and individuals in the forthcoming Budget.  

Despite the announcements in the Spring Statement in March, the National Institute of Economic and Social Research stated in May that Reeves was already again on track to break the fiscal rules, with a shortfall of £57.1 billion by 2029-30. Since then, growth has weakened further, and the government has been forced to backtrack on some of the cuts announced in the Spring.  

Given the shortfall, the government’s insistence that it will stick to the fiscal rules and the apparent difficulty of pushing through spending cuts, many now see significant tax rises in the Autumn 2025 Budget as inevitable.