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Budgets are numbers.

In the next 24 hours we will be inundated with all sorts of figures – about the state of the economy, about the size of the deficit, about the fiscal rules that the new chancellor plans to introduce in the coming months.

But in reality, most budgets, including this one, can really be boiled down to the difference between two big numbers: total government spending and total government revenue.

The UK government currently spends just over £1.2 trillion a year and receives just over £1.1 trillion in taxes and revenue.

In other words, this country spends more than it receives in tax revenue. Therefore, he has to borrow the difference.

This borrowing, also known as the deficit, amounts to (as you can probably tell from the figures above) around £100 billion a year.

And politicians, including the Chancellor, spend a lot of time worrying about the deficit.

The Chancellor’s noble goal won’t come cheap

Indeed, the main purpose of the various financial rules they have imposed on themselves in recent decades has been to reduce the gap between these two big numbers.

Generally speaking, the easiest way to do this is to cut back on something that few people notice in the short term – public investment.

Since coming to power in 2010, George Osborne has cut many parts of government spending, but he has absolutely cut the amount the public sector spends on buildings, infrastructure and equipment – capital expenditure.

Jeremy Hunt, having briefly increased overall investment since the pandemic, was planning for a similar fall in investment in the coming years.

Rachel Reeves has repeatedly said before the Budget that she plans to invest much more in the coming years.

This is a noble goal because investments tend to benefit future generations, but they won’t be cheap in the short term.

Will markets be scared of fraud?

Indeed, maintaining investment spending at current levels would cost around £30 billion a year by the end of this decade.

So how does the Chancellor relate this to his budget rules?

Well, one part of the answer is that she plans to increase the revenue flowing into the exchequer, reportedly through higher National Insurance charges for insurers.

But the other part of the answer is that it is also changing its financial rules.

In short, Ms. Reeves is likely to choose a set of fiscal rules that ignore investment spending.

Both her updated debt rule and her current budget rule essentially exclude capital spending – although they do include interest costs on debt, so she can’t just borrow willy-nilly.

This may sound like a fiscal ploy, and some market participants are worried that investors will soon get scared as a result.

Indeed, some suggest they already are, and point to the fact that UK government borrowing costs – as measured by the benchmark 10-year bond yield – have risen from less than 4% to almost 4.3% in the last month alone.

Expect surprises

However, this is a slight misunderstanding of this market, which is influenced by both global economic factors and central bank actions, as well as UK fiscal policy.

Indeed, compare recent moves in UK borrowing rates with those in Germany and the US, and UK government bond yields are close to where they typically trade ahead of the Budget.

And they’re far, far below where they were in the run-up to Liz Truss’ mini-budget.

Regardless, there are sure to be a few unexpected surprises and some important new data in this financial event.

After all, this is a budget.