Two budgets in two days presents more than a few headaches for economists, journalists and the very people who policies will impact.

This afternoon UK Chancellor Rishi Sunak will present his annual budget to the House of Commons. Yesterday, the Welsh Government finalised its own budget.

When the Chancellor stands up in the House of Commons at 12:30, he will make a series of promises, some will apply to Wales, some will apply to England only.

Things like the Furlough Scheme and Universal credit apply to people in Wales, while spending for devolved areas like health and business will not.

So, how does it all work? And what should we look out for?

How is the Welsh government funded?

While the Welsh government does collect some taxes like the Land Transaction Tax and the Landfill Disposals Tax, it receives most of its funding from something known as the ‘block grant’.

It receives its share of the total amount spent by the UK Government on ‘England-only’ policies like health and schools.

Adjustments to the block grant are determined using the ‘Barnett Formula’, used to calculate how much the grant will change following an increase or decrease in the UK-wide budget.

The formula factors in the population of Wales compared to England.

In February for example, the UK Treasury announced an extra £650m in funding for the Welsh government because of planned extra spending in England to tackle coronavirus.

What to look out for today

When the Chancellor talks about devolved policies like schools and health, he is talking about how money will be spent in England.

How the Welsh Government intends to spend money on devolved matters was laid it in its budget yesterday.

There are some potential announcements that Mr Sunak will make that will apply in Wales.

  • The UK-wide furlough scheme is expected to be extended until the end of September. HMRC HMRC reports that 12% of the Welsh workforce was on furlough at the end of January.
  • An extension of the £20 increase to Universal Credit for a further six months, around 280,000 people in Wales receiving Universal Credit in January.
  • Changes to income support for self-employed people with claimants eligible for up to £7,500 in total over three months.
  • A staggered increase to corporation tax with suggestions it may increase from 19% to 25% after a government review.
  • A £150m Community Ownership Fund could help communities apply for cash to take over pubs, theatres and sports clubs.
  • An additional £93million to "turbocharge" Wales’ green recovery, however, the Welsh Government said it was waiting to see if it was new money.
  • An extra £1.6billion for the UK's Covid vaccination rollout.

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What did yesterday’s Welsh budget include

A full rundown of yesterday’s £1.1billion Welsh budget can be found here however plans include:

  • An extra £224m for capital projects like housing, schools and other infrastructure.
  • £630m to support the NHS and councils' continued response to the pandemic during the next six months.
  • £200m set aside in reserves for additional support for business during 2021/22, again to respond to whatever challenges the pandemic will present.

Today’s UK budget could increase funds available for the Welsh Government, and Finance Minister Rebecca Evans is expected to provide an update following the Chancellor’s announcements later this afternoon.

What is being said about the Chancellor’s budget?

The Institute of Fiscal Studies’ Paul Johnson said Rishi Sunak’s extension of the Furlough Scheme was offering badly affected businesses a “grace” period to help them get up and running.

Mr Johnson told the BBC’s Today Programme: “The thinking behind that is that there will be some businesses that are still struggling with demand, struggling to get back on their feet so giving them two or three months of grace will help to ensure that jobs are maintained.

“Remember the Chancellor tried to do this last summer – he was intending to phase out furlough over the summer and early autumn and of course that couldn’t happen because of the return of the virus.

“The key thing now is that this really does end in September because we really do move back to normal.”

On the impact the pandemic has had on the UK’s borrowing and debt, Sir Robert Chote, the former chairman of the Office for Budget Responsibility, said there was “no robust case” for looking to claw back the UK’s pandemic debt quickly.

Sir Robert, who stood down in 2020 after 10 years in post, told the Today Programme: “The argument that we have borrowed an enormous amount of money – and goodness we have over the last year to 18 months – and that all has to be paid back very quickly, there is no robust case for making that argument.

“Most economists would accept that if you have the size of the public debt jump up so you have a temporary increase in borrowing that increases your stock of debt, you don’t want to try to reverse that very quickly or very aggressively.

“One of the lessons obviously people have taken out of the experience after the financial crisis is that even if you do have a bigger structural budget deficit, even with that you don’t want to go at it too aggressively in case you weaken the recovery and make the situation worse.

“But that is not to say that if there is a permanent increase in the structural budget deficit from the hit to the economy, and in addition you decide you want a larger state coming out of this, then the decisions on tax can’t be put off forever.”

The Chancellor is expected to make his statement at 12:30, with reaction from the Welsh Government later this afternoon.