Governments require Parliament’s approval to spend money, as well as to raise revenue in the form of taxes. Parliament scrutinises a government’s spending plans by the ‘estimates’ process, where the Government presents proposed budgets for Parliament’s approval, while taxes are dealt with in the Budget.
Each year, the Government lays out its plans for new taxes, and changes to existing taxes, in the Budget, with the Chancellor giving a speech to the Commons. There needs to be a Budget each year because some major taxes—such as Income Tax—are technically only temporary taxes, and need to be reapproved. As well as setting out the Government’s plans for taxes, Budgets also give an overview of the general state of the UK economy.
Historically, the Budget has generally been held in the spring, just before the start of the new financial year. However, after the Chancellor decided in 2016 to have just one principal fiscal event a year—in line with most other major countries—the Budget was moved to the autumn.
Broadly, there are two main stages to getting a Budget through Parliament. First, there are a series of votes and debates in Parliament to provisionally allow the Government to make changes to tax; and second, the Budget is then translated into law in the form of a Finance Bill, which gives the provisional arrangements permanent effect.
Provisional collection of taxes and Budget Resolutions
Once the Chancellor has finished speaking in the Commons, the Government seeks provisional agreement from Parliament for any changes to tax measures, or new tax measures, it wants to come into force before the Finance Bill is passed. For changes to existing taxes that the Government wants to come into effect on the day of the Budget itself—for example, excise duties on alcohol or tobacco—MPs are asked to agree to a single Provisional Collection of Taxes motion.
Government also seek provisional agreement for each tax measure that is contained in the Budget and due to come into force before the Finance Bill is passed. It does this through a series of Budget Resolutions that correspond to each tax measure. These Budget Resolutions are usually debated by the Commons for four days, and must be passed within 10 sitting days of the Budget. The debate on the Budget Resolutions is designed to allow MPs to consider the Government’s tax proposals as part of its broader approach to the public finances, and each day of debate covers a particular theme—for example, health. Generally, MPs will not divide—formally vote—on each Budget Resolution, but votes may occur on more contentious or significant Resolutions.
Once the House of Commons has passed the Budget Resolutions, the Government will introduce a Finance Bill, which puts the Budget into law, and makes tax measures agreed to in the Budget Resolutions permanent.
Finance Bills move through Parliament like other bills, with one major exception: while a Finance Bill must go through the Lords, the tradition of the Commons’ privilege on financial matters means that the Lords is not expected to amend or vote down financial legislation.
A Finance Bill must receive its second reading within 30 days of the passage of the Budget Resolutions, and become law within seven months.
A government could be defeated on a specific Budget Resolution; or on a vote on the subsequent Finance Bill. The effects of this on a government would depend on the specific vote that they lost.
Governments have previously been defeated on particular measures contained within Budgets. For example, in 1994, the then-Government was defeated on a proposal to increase the rate of VAT on fuel. This forced the Chancellor to bring forward a new package of measures to deal with the unexpected loss of revenue—but it was not fatal to the government.
But if a government were to be defeated on a measure that clearly affected their ability to raise vital revenue, and therefore constrained their ability to govern, a defeat on a Budget could be more damaging. It would not, however, automatically bring down a government. Under the terms of the 2011 Fixed Term Parliaments Act, confidence votes must be specifically worded to trigger a general election. This means that a government defeat on a Budget measure—and particularly on one of major significance to a government’s financial plans—would not necessarily bring down a government, though it is likely it would face a vote of no confidence shortly afterwards, as its ability to command the will of the House would be in question.
There are two ways that a government could delay a Budget. First, it could choose to schedule a Budget later in the financial year if it wished, though this would mean moving away from its post-2016 commitment to holding one Budget every autumn.
Second, a government could still hold a Budget in the autumn, but then choose not to bring forward some elements of it. After bringing forward necessary motions on immediate tax changes, and the first Budget Resolution, a government could then decide not to bring forward other Resolutions (except on immediate changes). A small Finance Bill would still be necessary to make permanent any resolutions that were agreed to. It could then bring another Budget forward dealing with resolutions it had dropped. This has happened before: in 1848, the Government had to introduce three Budgets. But in such a scenario a government would have been significantly weakened politically.