Spring Statement 2025 Key Highlights

The Spring Statement delivered by Rachel Reeves marked a significant occasion as the Chancellor sought to address the UK’s mounting debt issues while attempting to balance the national finances. The Office for Budget Responsibility has projected that the UK will face a deficit of £36.1 billion in the financial year 2025-26, indicating the ongoing challenges in managing fiscal health.

The forecast for overall economic growth appears modest. The OBR has estimated an expansion of just one per cent this year, which is expected to rise slightly to 1.9 per cent next year. Inflation is predicted to average 3.2 per cent in the current year before decreasing to 2.1 per cent in 2024, a shift from previous forecasts that indicated inflation levels would remain higher for a longer duration.

Significant announcements regarding defence funding were made, with an additional £2.2 billion allocated to investment in new military equipment. This includes modernisations such as air defence systems for Royal Navy vessels, allowing the government to enhance national security capabilities.

As part of the commitment to support housing, planning rule modifications are expected to contribute £6.8 billion to the economy over the next five years. This measure aims to facilitate the construction of over 1.3 million new homes, addressing the pressing need for housing supply across the country.

The statement also touched upon welfare reforms, with the universal credit standard allowance set to increase from £92 per week to £106 by 2029-30, reflecting a move to support those in need. However, there are significant cuts in certain areas, with the health element of universal credit being reduced by 50 per cent for new claimants.

With the Chancellor’s focus on improving tax compliance, there will be a push to enhance the capacity of HMRC to tackle tax avoidance. This initiative is expected to increase the number of cases of tax fraud brought forward each year by 20 per cent, effectively raising £1 billion by the end of the decade.

As the government navigates these financial challenges, the implications of this Spring Statement will be closely monitored, with many looking for changes in fiscal policy and their potential impact on the wider economy.