A ‘fiscal event’ is to be delivered on Friday, setting out what help is to be made available to get people through the winter and the cost-of-living crisis.
It operates differently from the full Budget and Chancellor Kwasi Kwarteng is to spell out some of the details on how the energy bills freeze will be funded.
The Government is thought to be planning to borrow as much as £150 billion to cap average energy bills at £2,500 a year for two years. Further details are also expected on support for businesses.
How does the Budget work?
Each year the Chancellor makes the Budget statement to the House of Commons outlining Government proposals for changes to taxation.
The Commons debates the Budget and scrutinises the subsequent Finance Bill, which enacts the Chancellor’s proposals.
Both are usually annual events, in part because Income Tax and Corporation Tax are annual taxes which have to be renewed by legislation each year.
Other UK taxes including all indirect taxes, petroleum revenue tax and taxes on capital are ‘permanent’.
What is a ‘fiscal event’?
A ‘fiscal event’ falls short of a Budget. But in some circumstances, such as the current situation, the Government may wish to quickly announce changes to tax and spending instead of waiting until the next Budget.
The Chancellor is technically able to announce changes to fiscal policy at any time, although the Government would need to pass a Budget resolution to make changes to tax.
If the Government wants to hold a Budget outside the usual cycle, it needs to provide 10 weeks’ notice to the Office for Budget Responsibility (OBR) to prepare this.
Less Parliamentary scrutiny
However, there is nothing precluding Chancellors from announcing changes to fiscal policy without an accompanying forecast.
They could announce new policy through a ministerial statement in the House of Commons or through the media without a Commons statement as they did during the pandemic.
Then Chancellor Rishi Sunak introduced the furlough scheme at a Downing Street press conference.
This method may be justified during an emergency and to quickly support households, it restricts Parliamentary scrutiny.
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