What is the Budget and why does it matter?

We weren’t supposed to be having a Budget this month. Philip Hammond moved the annual “fiscal event”, as Treasury wonks like to call it, from the spring to autumn, which the Treasury has long thought is the right time for it, to allow for legislation before the start of the tax year.

But when the Commons voted at the end of October for an early election, the Budget planned for November was postponed.

Now, a lot of what was going to be in the Budget has been postponed again. Rishi Sunak, the chancellor, will go through the motions, standing up and making a speech in parliament on Wednesday. But the uncertainty about coronavirus means that a lot of important decisions that he was going to announce will now be delayed until the “real” Budget in November (although on one recent occasion the Treasury’s definition of autumn managed to stretch to early December).

This week’s Budget was going to mark the start of big new spending on infrastructure, including investment in plans to reach a zero carbon economy by mid-century. This last bit was supposed to be a curtain-raiser for the UN climate change conference in Glasgow in November.

In addition, the Budget was intended to end austerity, announcing new spending to deliver manifesto promises of 20,000 more police, 50,000 more nurses and 50 million more GP appointments a year.

It now looks as if the revolution is being postponed. Only last month Sajid Javid confirmed the government’s intention to publish its national infrastructure strategy with the Budget, but Sunak has now delayed it, with no date given.

Government sources insist the Budget will contain changes to ensure that more infrastructure projects are built outside the southeast, and that the delay in publishing the strategy is to allow it to be more ambitious, and more focused on zero-carbon ambitions, especially after the Heathrow court ruling.

Before coronavirus, all eyes were on the rules for balancing the government’s books – which appeared to be the substance of the dispute that cost Javid his job. Sunak was expected to reclassify investment in human capital (a fancy way of saying education) as capital rather than revenue, or to stretch from three years to five the period for balancing revenue spending (that is day-to-day spending that does not generate a long-term return).

Either would be a significant relaxation of fiscal discipline, allowing an increase in government borrowing. Now that there is a need to boost the economy in order to counteract the effect of the virus, it may be that Sunak will announce one or both anyway.