25th Mar 2025
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This week’s Spring Statement saw Chancellor Rachel Reeves deliver some significant changes and challenges. Read on to find out how the Spring Statement announcements may affect you.
Blow to Economic Forecast
The Office for Budget Responsibility (OBR) forecast was a big part of the Autumn Budget, where Reeves stated a mission for economic growth. It has now been revised to just 1% – half of the previous budget. Reeves says plans such as the new Heathrow runway, pensions investments, changes to planning processes, and the National Wealth Fund will help tackle this. She also pointed out that the OBR have upgraded forecasts from next year and beyond, however.
Universal Credit and Other Benefits
The announcements last week are here to stay, according to the Spring Statement. Huge cuts to social security payments is the biggest (and most unpopular) change to the budget, in an attempt to claw back just under £5bn in costs. However, the OBR has confirmed that the actual savings would be closer to £3.4bn once costs of additional spending elsewhere is taken into account.
Along with the proposed cuts to in-work benefit PIP (Personal Independent Payment), which is currently under a green paper consultation review, today we heard about additional cuts to Universal Credit for some. The standard allowance will increase from £92 a week in 25/26 to £106 a week by 2029/30 tax year. However, the health element – additional money for those too sick to work or who cannot work full time due to illness – is going to be cut by 50% and frozen for new claimants.
There was no further detail about the already-announced changes, such as migrating PIP to Universal Credit and changing Work Capability Assessments. This is because they are currently in a green paper consultation and there are no further updates following last week’s announcements.
Reduced Govt Running Costs
Reeves promised to ‘fundamentally reform the British State’. She wants to introduce ‘efficiency savings’ to reduce the running costs of Whitehall by £2bn (15%) by 2030, with some job cuts and introduction of technology. This includes a £3.25bn ‘transformation fund’ of AI software, civil service voluntary redundancies, increased support for children in foster care for support in education and ongoing work, and new computer systems for the Govt such as for the Ministry of Defence and HMRC.
Massive Defence Spending Increase
With the world changing fast around us, the Chancellor committed a further £2.2bn spending on defence this year. This includes defence manufacturing and industry, as well as training for jobs – and also improvements to housing for military families.
Taxes
Despite a record tax burden, the Chancellor confirmed no tax increases (for now). However, changes announced in the autumn, such as the increase in National Insurance for employers (and cut for workers), stamp duty rises, and frozen Income Tax thresholds, will go ahead as planned, predicted to balance around £40bn of the tax burden.
Reeves did promise a ‘crackdown’ on tax evaders, with an investment in ‘cutting edge technology’ to help recoup an extra £1bn a year in unpaid taxes.
What About Fuel, Alcohol Etc?
Because this was not technically a budget but a financial ‘realignment’ because ‘the world is changing’ since Labour came to power, there was not a full breakdown on changes that usually are announced that impact the cost of our spending, such as fuel and alcohol duty. However, forecasts suggest households will be an average of £500 better off a year in future… but that remains to be seen, as they are only forecasts.
