On Wednesday, 26th March 2025, Chancellor of the Exchequer Rachel Reeves delivered her Spring Statement to Parliament. The measures announced the aim to “grasp the opportunities in a changing world.”
The chancellor’s statement is not a formal budget but an update on the economy and any developments since her official fiscal statement in October 2024.
Economic Forecast
Detailed in the Spring Statement, the latest economic outlook from the Office for Budget Responsibility (OBR) revealed a changed position from the report published in autumn. Specifically, the OBR downgraded its growth forecast for 2025 from 2% to 1%. However, the OBR upgraded its growth forecasts from 2026 onwards, meaning the economy should be larger by the end of the forecast period (2029-30).
Moreover, compared to its autumn forecast, the OBR predicts people will be financially better off from 2029. “[Disposable income] will grow almost twice the rate expected in the autumn, [meaning that] households will be [on average] over £500 a year better off under this government,” said Reeves.
Announced Measures
The following is an outline of the measures announced in Reeves’ Spring Statement:
Welfare
- The universal credit standard allowance will increase from £92 per week in 2025-26 to £106 weekly by 2029-30.
- The universal credit health element will be cut by 50% from April 2026 and frozen for new claimants until 2030 (rather than rising with inflation.)
- Due to tightening eligibility criteria, approximately 800,000 individuals will no longer receive the daily living component of personal independence payment from November 2026.
- Individuals under 22 years of age will no longer be able to claim the universal credit incapacity benefit top-up.
Overall, the announced welfare cuts will save the government £4.8 billion.
Defence
- The government will spend 2.5% of gross domestic product (GDP) by 2027 to make the UK a “defence industrial superpower.”
- The Ministry of Defence will receive an additional £2.2 billion in 2026 for new high-tech weaponry, refurbishing military homes and updating Portsmouth’s HM Naval Base.
Defence spending will be funded by reducing overseas aid from 0.5% to 0.3% of GDP in 2027.
Departmental Cuts
The administrative budgets of government departments will be cut by
- 15% by 2030, saving about £2 billion. Approximately 10,000 civil service jobs could be at risk.
- A voluntary redundancy scheme for civil servants will save £3.5 billion by 2029-30.
Housing
- The government will oversee the building of 1.3 million new homes over the next five years, marginally short of its 1.5 million election pledge. Up to 18,000 new social and affordable homes will also be delivered.
- Funding of £600 million will be made available to train up to 60,000 bricklayers, electricians, engineers and carpenters to address labour shortages in the construction industry and facilitate building targets.
- Reforms to the Planning and Infrastructure Bill will loosen restrictions for building on greenbelt land and reintroduce mandatory housing targets for local councils.
Overall, the government’s planning reforms and housing targets are expected to increase GDP by 0.2% in 2029-30, providing an additional £6.8 billion for the economy.
Taxes
The chancellor did not announce any new tax increases as part of her Spring Statement. However, she aims to claw back an additional £1 billion per year from tax avoiders using “cutting-edge technology” to increase the number of tax fraudsters charged by 20% annually.
Her previously announced £40 billion tax raid, as detailed in the Autumn Statement, will begin in April 2025. Changes coming into force in April include a National Insurance increase, a stamp duty rise and a freeze on income tax thresholds.
Next Steps
The government’s measures aim to put public finances on a sustainable path, protect working people and kickstart economic growth. However, in her speech, Reeves acknowledged that the global economy has become more uncertain recently. As such, both individuals and businesses should consider ways to remain resilient amid a tough economic climate.
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