26 March 2025
Maintaining stability and increasing productivity in an unstable world was the theme of Chancellor Rachel Reeves’ Spring Statement today (26 March).
The Chancellor opened her speech by emphasising the globally instability that has been brought about by the war in Ukraine, and how this has affected trading patterns.
The Office for Budget Responsibility (OBR) has cut the UK’s growth forecast by half, to 1%, Reeves revealed.
However, she emphasised that the Government’s two fiscal rules – to ensure that public spending is under control and matches tax receipts, and to drive growth in the economy – are “non-negotiable.”
The Government is meeting challenges by “not stepping back, but stepping up,” Reeves said.
Her plan is based on “restoring headroom” and moving from deficit to surplus, with the aim of reducing levels of debt and borrowing in the years ahead in order to “spend more on the priorities of working people,” Reeves added.
National debt interest payments are currently £102.5 billion per year, more than the budget for defence, the Home Office and the Ministry of Justice combined, she revealed.
She went on to confirm that no further tax increases would be announced as part of the Spring Statement.
“When working people are paying their taxes while still struggling with the cost of living, it cannot be right that others are still evading what they rightly owe in tax in the budget,” Reeves said, before announcing that plans to reduce tax evasion would raise £6.5 billion by the end of the current OBR forecast.
Focus on public services
“Earlier, the Prime Minister set out plans to abolish the arm’s length body NHS England and ensure that that money goes directly to improving the service for patients,” Reeves said, referencing Sir Keir Starmer’s announcement on 13 March that NHS England would merge with the Department of Health and Social Care.
She added that the Health Secretary, Wes Streeting, “is driving forward vital reforms to increase NHS productivity, bearing down on costly agency spend to save money so that we can improve patient care.”
Reeves went on to speak about the importance of rebuilding public services, in the context of NHS waiting lists falling for the fifth month in a row.
Labour has provided two million extra NHS appointments since it came into office, she said.
In the context of plans to cut the Civil Service by 15%, which were revealed ahead of the statement, Reeves revealed a £3.25 billion ‘transformation fund,’ which it is hoped will make public services more efficient, productive, and focused on the user.
It is hoped that this will create £3.5 billion in day-to-day savings by 2029–2030.
Reeves also emphasised that day-to-day spending is forecast to increase above inflation for every year of the current OBR forecast.
Capital spending – the part of the budget that covers areas including infrastructure, buildings and technology, including in hospitals – will increase by £2 billion per year, Reeves said.
At the same time, Reeves confirmed cuts of £4.8 billion to the welfare budget.
The Universal Credit standard allowance will increase from £92 per week in 2025–2026 to £106 per week by 2029–2030, while the Universal Credit health elements will be cut for new claimants by around 50% and then frozen, she said.
Reeves framed this in the context of Labour’s plan to get more people into work.
Towards this aim, £1 billion will be invested in personalised support, while £400 million has been set aside to support job centres and the Department for Work and Pensions, she said.
Spending on disability and sickness benefits will continue to rise, Reeves said, although she did not go into further detail on this.
What else was included in the Spring Statement?
Reeves detailed the Government’s plans to increase defence spending in order to make Britain a “defence industrial super power,” and to reduce foreign aid to 0.3% of gross national income.
A reduction in overseas aid will lead to savings of £2.6 billion in day-to-day spending by 2029–2030, which will fund “capital intensive defence commitments,” she said.
Reeves also noted that planning reforms, confirmed in December 2024, will see house building reach a 40-year high, with 305,000 new homes being built per year by the end of the forecast period.
There are “no shortcuts to economic growth,” Reeves acknowledged, but emphasised that planning reforms will increase gross domestic product, as confirmed by the OBR.
Reeves closed her statement by focusing on the Government’s key objective of growth, saying that, according to OBR forecasts, people will find themselves £500 per year better off by this autumn when compared to the final budget put forward by the previous government.
“Real household disposable income will now grow this year at almost twice the rate expected,” Reeves said.
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