Rishi Sunak will deliver a Budget next month, where he will plot the UK’s course out of the coronavirus crisis.
The annual statement on pay, pensions and taxes will be even more important this year after nearly a year of restrictions has wreaked havoc on the economy.
It will be Mr Sunak’s second Budget, after he scrambled to put together a last-minute statement in March 2020, only weeks into the job.
But the Chancellor faces an even bigger challenge this year, as he tries to find ways to boost the battered economy and save jobs after lockdowns forced closures of thousands of businesses.
It comes as the UK’s economy shrunk at its fastest rate since the 1920s last year, with gross domestic product (GDP) dropping by 9.8%, according to the Office for National Statistics.
And despite furlough support, more than 1.7 million people are out of work, with over 800,000 fewer employees on company payrolls since the pandemic began.
Here’s what we know so far about the Budget and how it will affect you.
What is the Budget?
The Chancellor’s annual statement is a crucial moment, where he sets out plans for public spending and taxation, alongside independent economic forecasts.
The Budget also sets duties on fuel, cigarettes and alcohol as well as the minimum wage.
MPs will vote on whether to accept it, but Boris Johnson’s 80-strong majority means it should pass easily.
When is the Budget?
This year’s Budget will take place on Wednesday, March 3.
Mr Sunak will deliver the statement in the House of Commons, which will likely come after Prime Minister’s Questions at about 12.30pm.
Labour will respond to the proposals, which will then be debated by MPs over several days.
Who is Rishi Sunak?
Mr Sunak was relatively unknown outside of Westminster when he became Chancellor last February.
His rapid rise to one of the Government’s top jobs came after his predecessor Sajid Javid quit in protest at being asked to sack his advisers.
Mr Sunak regularly won favourable poll ratings last year following generous schemes such as furlough.
The son of a GP and a pharmacist, Mr Sunak grew up in Hampshire and was privately educated at Winchester College, an all-boys boarding school.
He studied at Oxford and later got an MBA from Stanford University in the US, where he met his wife Akshata Murthy, the daughter of Indian tech billionaire NR Narayana Murthy.
What can we expect in the Budget?
More than £280 billion has been spent on the coronavirus response according to the National Audit Office – and Mr Sunak will have to decide how to settle that bill.
The Chancellor has reportedly told Tory MPs he is considering tax hikes, to allow him to make cuts before the 2024 election.
However the Treasury never comments on what could be in the Budget ahead of time, and some rumours doing the rounds may have been put out to gauge reaction.
Mr Sunak’s decisions will also be affected by the pandemic, as the situation tends to evolve rapidly.
Boris Johnson is due to set out a roadmap on February 22 on how he plans to ease lockdown measures, which will undoubtedly be a major factor in the Chancellor’s plans.
Working families could face a hit if Mr Sunak decides to press ahead with tax hikes.
Mr Sunak is said to be considering axing rises to the Income Tax personal allowance to help pay for the Covid crisis, according to the Daily Telegraph.
The tax-free personal allowance – currently £12,500 – was due to rise in April for the first time since 2019.
While the allowance would have only risen to £12,562 this year, saving a family just £12.50 in tax, that would have paved the way for bigger rises in future years that could have built on it.
The threshold for paying 40% tax had also been due to rise from £50,000 to £50,250 in April, saving wealthier families £62.50 in total.
There has also been speculation that Capital Gains Tax might be raised to 45%, bringing it in line with Income Tax, from its current rate of 20%.
The Treasury was said to be mulling scrapping council tax and stamp duty – and replacing them with a property tax.
A proportional property tax could be levied on the existing values of homes, rather than 1990s valuations, which council tax is based on, the Sunday Times said.
Stamp duty has been frozen during the pandemic on properties less than £500,000 – but this is due to end on March 31.
Furlough and other support schemes
The Coronavirus Jobs Retention Scheme (CJRS) – known as furlough – has already been extended three times since Mr Sunak announced it last year.
It is currently due to wind up at the end of April, but it is likely Mr Sunak will extend it again due to the latest lockdown.
The Prime Minister is not expected to begin easing restrictions until March at the earliest, with schools expected to be the first to open.
It is not clear when shops, leisure facilities and hospitality venues will be able to open yet, or when people will be able to start returning to the office.
Mr Sunak will likely want to extend the furlough scheme until the economy has reopened properly – or risk mass job losses.
The IPPR thinktank recently warned that up to 9 million jobs could be at stake without an extension to business support, including furlough, loan guarantees and the business rates holiday.
There may also be more details on support for the self employed.
Mr Sunak could announce a fourth round of the Self Employed Income Support Scheme, which gives grants to freelancers and people who run their own businesses.
Universal credit uplift
Mr Sunak has been under pressure to keep the temporary £20-a-week uplift to Universal Credit.
The £1,040 annual boost was brought in to help people during the pandemic and it is due to expire in April.
The Chancellor is said to be reluctant to extend the uplift, resulting in a back and forth between the Department of Work and Pensions and the Treasury.
There has been speculation he will push the expiry date back six months, rather than making it permanent.
He is also said to be considering a one-off £1,000 grant to struggling families to replace the uplift.
But Work and Pensions Secretary Therese Coffey recently poured cold water on the idea, telling MPs it was not the best way to help families.
Cigarettes and alcohol
The Budget often includes plans to put another penny or two on cigarettes and alcohol.
Final rates are confirmed on the bay and usually apply from that evening.
But Mr Sunak might decide to freeze duties on beer to get a good headline amid the gloom.
The Chancellor reportedly warned MPs he would have to increase fuel duty by 5p per litre to pay for the Universal Credit uplift.
The levy has been frozen at around 58p for a decade – saving the average car driver a cumulative £1,200 each.