Chancellor unveils anticipated spring statement

This afternoon (26th March 2025) in the House of Commons, chancellor of the exchequer Rachel Reeves delivered her spring statement which, rather than a formal budget like her Autumn announcement, is an update on the economy and the trajectory of fiscal matters across England.

The chancellor of the exchequer outlined that her fiscal rules will remain in tact; namely, that taxes will not increase, and that there will be no borrowing. This means that any extra revenue made must come from cutting other budgets.

Notably, the Office for Budget Responsibility (OBR) has halved the UK growth forecast for 2025 from two per cent to one per cent, but the chancellor expects the economy will grow over time. She explains that the government’s budget will move from a deficit of £36.1 billion in 2025-26 and £13.4 billion in 2026-27 to a surplus of £6 billion in 2027-28 and rising to £9.9 billion in 2029-30.

The OBR thus predicts GDP growth of 1.9 per cent in 2026, 1.8 per cent in 2027, 1.7 per cent in 2028, and 1.8 per cent in 2029.

With much controversy and backlash, Reeves announced further welfare cuts after the news that stricter eligibility tests for personal independence payments (Pips) will save only £3.4 billion compared to the expected £5 billion. Reeves announced the universal credit health element would be halved and frozen for newcomers, rather than rising alongside inflation.

Universal credit standard allowance is to rise from £92 per week in 2025-26 to £106 per week in 2029-30. According to the OBR, the new welfare savings package will save £4.8 billion.

The Department for Work and Pensions’ impact assessment has estimated that the impact of the health and disability benefit cuts will put an extra 250,000 people into poverty, including 50,000 children.

Although taxes won’t increase, Reeves announced plans to crack down on tax evasion, which she claims will raise an extra £1 billion for the economy.

The chancellor further confirmed the government’s pledge to spend 2.5 per cent of GDP on defence by 2027, giving the Ministry of Defence a £2.2 billion boost next year.

Reeves additionally confirmed her plans to cut day-to-day spending across the government by £6.1 billion in 2029-30, by cutting around 10,000 civil service jobs, including those in HR, communications, policy advice, and office management. She also announced a new Transformation Fund which will utilise £3.25 billion investment to deliver public service reforms.

Rachel Reeves claimed that the government’s housing reforms will permanently increase the level of real GDP growth by 0.2 per cent in 2029-30, and said the OBR has concluded that the government’s reforms will have housebuilding reaching a 40-year high.