Chancellor Rachel Reeves has cut billions of pounds of planned spending, including on benefits, after Britain’s economic growth and public finances were hit since her autumm Budget.
Here are the key points in the Spring Statement 2025:
Economic forecasts:
The Office for Budget Responsibility (OBR) halved its economic forecast for the UK economy from two per cent in the autumn to one per cent now.
But Ms Reeves stressed: “ I can confirm to the House that the OBR have upgraded their growth forecast next year, and every single year thereafter, with GDP growth of 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.”
The OBR forecast that CPI inflation will average 3.2% this year, before to 2.1% in 2026 and meeting the 2% target from 2027 onwards.
Fiscal headroom:
Economic blows meant the current budget would have been in deficit by £4.1bn in 2029-30, the Chancellor told the Commons, having been in surplus by £9.9bn.
The Chancellor vowed to restore the “fiscal headroom.”
She said: “I can confirm that I have restored in full our headroom against the “stability rule”… … moving from a deficit of £36.1bn in 2025-26 and £13.4bn in 2026-27… … to a surplus of £6.0bn in 2027-28, £7.1bn in 2028-29 and £9.9bn in 2029-30. “
Benefits bill:
Benefits cuts and reforms will save £4.8bn in the welfare budget, Ms Reeves told MPs.
The Universal Credit Standard Allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30, while the Universal Credit Health element will be cut by 50% and then frozen for new claimants.
A stricter eligibility test for personal independence payments (Pips), the main disability benefit, will be introduced from November 2026.
Cost of living crisis:
But the Chancellor claimed that the OBR had calculated “that households will be on average over £500 a year better off under this government”.
She said: “The OBR confirm today that Real Household Disposable Income will now grow this year at almost twice the rate expected in the autumn. And living standards will rise twice as fast this parliament compared to the last.”
Housing:
Housebuilding will reach a 40-year high of 305,000 by 2029/30, Ms Reeves said the OBR had confirmed.
She stressed that planning reforms, including the use of “grey belt” and mandatory housing targets, would boost real GDP 0.2% by 2029-30, or an extra £6.8bn.
Defence spending:
Ms Reeves confirmed an additional £2.2bn for the Ministry of Defence next year, as the UK moves towards spending 2.5 per cent of GDP on defence by April 2027 in the face of growing world threats.
Cost of Government:
Whitehall departments are being ordered to slash their administrative costs by 15% by 2030. At least ten thousands jobs are set to be axed. Reforms, including adoption of AI, aim to save £3.5 billion by 2029/30.
Tax avoidance :
A further £1 billion will be raised through strengthening a crackdown on tax avoidance, according to the Government’s plans to use “cutting-edge technology” to catch and charge 20 per cent more fraudsters a year.
Fiscal rules:
The Chancellor vowed not to tinker with her fiscal rules, telling MPs: “These fiscal rules are non-negotiable. They are the embodiment of this government’s unwavering commitment… … to bring stability to our economy… … and to ensure security for working people.”
The two rules are to ensure day-to-day spending is met by tax receipts by 2029-30, and that net financial debt falls by the end of the forecast period.
