What is the Budget and how does it affect me?

The Chancellor of the Exchequer with his red Budget briefcase The current Chancellor of the Exchequer is George Osborne

Every year the government explains how it will spend the country's money for the next 12 months.

The Budget is worked out by the man in charge of Britain's money - the Chancellor of the Exchequer - with help from his office, the Treasury.

The current Chancellor of the Exchequer is George Osborne.

Why do we have a Budget?

Just like you decide how to spend your pocket money, the government has to decide how to spend money on services like schools, hospitals, the police and housing.

The government needs to work out how much money it has in the bank, so it can work out how to spend it on the country.

What's the red briefcase about?

Usually when you see the Chancellor make the Budget statement on TV, he is waving around a red briefcase. It traditionally contains the Budget speech.

Money, credit cards and a piggy bank In the Budget the government works out how much money it can spend on the country

The original red briefcase was first used by politician William Gladstone in 1860.

But in 1997 the former Chancellor Gordon Brown had a new one made as the old one was looking a bit tatty!

Where does the money come from?

The government gets the money from different types of taxes:

Income tax: Everyone in the UK who earns money has to pay some of that money to the government. Most people have to pay about a fifth, but richer people pay more.

VAT: You pay tax when you buy things. You may not realise it but 20% of the cost of many things goes to the government as VAT (Value Added Tax).

Duties: These are extra taxes charged on certain things like cigarettes, alcohol and petrol. Most of the money people pay for these goes to the government as 'duty'.

Does it affect me?

You might not think it but the Budget does affect your life.

The Chancellor may decide to spend more or less money on schools and he may also choose to spend money on youth schemes in your area.

Adults may find they have more or less money to spend - which could mean more or less pocket money for you!

What happens on Budget day?

The Chancellor makes his speech to MPs about how he's spending the public's money.

He tries to explain why he may be raising or lowering taxes on things.

At the end of the speech, MPs discuss the Budget, then vote on whether or not to accept it.

More on This Story

  • Watch NewsroundWatch Newsround

    Watch the latest update from Newsround, CBBC's news programme for children.

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.