The Budget

Governments borrow money to pay for their plans and fund its many obligations to the country, for example for public services or huge infrastructure projects. How does it do it? By selling bonds, known as ‘gilts’, to financial bodies such as pension funds or insurance companies. These bonds will be paid back by the Government in the future but – in the meantime - pay out interest to the holders.

Often confused with the national debt (see below), the deficit is when the Government spends more than it receives in tax and other revenues – and then has to borrow to cover the difference.

It’s a type of tax paid on specific goods, services or transactions. Examples include stamp duty on a home, fuel duty on petrol or diesel, and alcohol duty on beer or wine.

Policy is the giveaway word here: it’s simply the Government’s strategy for using taxes and spending to try and influence how the economy performs. The typical aims of a fiscal policy include keeping prices and wages stable, encouraging ways to boost employment, keeping inflation low and long-term economic growth.

In essence, this general term simply means any sort of major financial update. However, it’s also been used by Governments to describe particular events – the Mini-Budget was initially called a fiscal statement until it was rebranded.

In a nutshell, this is an estimate of the size and health of a country’s economy over a period of time - over three months (a quarter), say, or a whole year.

There are three ways to measure it, according to the Bank of England.

It’s worked out by either adding up the total value of: goods and services (‘output’) produced in the country; everyone’s income; or what everyone in the country has spent.

To measure GDP each quarter, the Office for National Statistics collects data from thousands of UK companies.

At its simplest, it’s the rate at which prices rise for goods and services over time.

The rate is calculated by the Office for National Statistics, which checks the prices of over 700 popular purchases (such as a loaf of bread or a new car). 

Levies are another form of tax paid to the Government. For example, the Apprenticeship Levy must be paid by all UK employers with an annual wage bill of over £3 million. 

When Chancellors talk about ‘the markets’, they tend to mean the financial markets where buyers and sellers trade securities such as bonds, stocks and other investments. What happens in the markets can affect the UK’s economy, and vice-versa. 

This is the total amount of money the Government has borrowed on behalf of the nation, mostly through the sale of gilts on financial markets. As of September 2022, it stood at roughly £2.4 trillion, or 98% of GDP. 

Paid by employees, employers and the self-employed, it helps to pay for some state benefits including the state pension and maternity allowance. 

A public body set up to give independent economic forecasts and analysis of the country’s public finances, it scrutinises the Government’s fiscal plans.

This is what the Government departments spend money on - providing services to the public such as health care or education. 

Also known as His Majesty’s Treasury, this Government department is headed by the Chancellor. It controls public spending, sets the UK’s economic policy and aims to promote economic growth.