Rachel Reeves has faced a great deal of scrutiny since Labour came into power in July 2024.

Elected partly on the promise of delivering a “fully costed, fully funded” plan to reform the UK economy, the party’s 2024 election pledge to balance the books has been complicated by a number of factors, including increasingly strained geopolitical tensions.

As such, the Chancellor has been positioned between the rock and hard place of responsibly shoring up the public finances and supporting growth.

This provided the context for the Spring Statement, presented to the House of Commons on 26 March. While not a formal budget announcement, it provided the Chancellor with an opportunity to deliver an update on economic activity and provide further detail on future plans.

Here we take a look at the key messages.

GROWTH

The Treasury’s challenge of stimulating economic growth was given added significance by a downgrading of the economic outlook from the Office for Budget Responsibility (OBR). The official forecaster now expects growth for 2025 to be 1% – half of its original 2% prediction.

However, the government pointed to upgraded estimates for each of the four following years, which would result in a rise to real household disposable income per person of 0.5 percentage points per year between 2025/26 and 2029/30, and would leave GDP at the end of the forecast 0.2% higher than the level set out in the autumn Budget.

INFLATION

On the morning of the Spring Statement, the Office for National Statistics reported that the rate of UK inflation fell back slightly to 2.8% in the 12 months to February. This was down from the 3.0% recorded in January but remains above the Bank of England’s 2% target.

For the year as a whole, inflation is expected to sit at 3.2%, driven above the previous forecast of 2.6% partly by higher costs for wholesale energy and food. It is predicted to decline in 2026 before falling in line with the 2% target in 2027.

The outlook has led some to predict the Bank of England could trim interest rates by a quarter of a percentage point to 4.25% at the next meeting of its Monetary Policy Committee on 8 May.

TAXATION

There were no significant changes announced to taxation in the Spring Statement, and the Chancellor has previously indicated her intention not to increase rates of income tax, corporation tax, VAT or National Insurance.

However, the Spring Statement prompted some commentators to suggest that, in order to fund spending commitments, there could be a requirement to raise up to £25bn through taxation.

The government did use the Spring Statement to reiterate efforts to clampdown on tax evasion, with unpaid liabilities to HMRC having increased to over £44bn. In response, the Chancellor announced further increases to the ranks of compliance staff, with a view to bringing in an extra £1bn in gross tax revenue per year by 2029/30.

WELFARE

Many of the headlines from the Spring Statement centred on changes to the welfare system. This included changes further to the previously announced cuts to health-related universal credit, which are now expected to deliver £3.4bn in savings rather than £5bn.

In addition to falling from £97 per week to £50 per week from April 2026 for new claimants, rates will be frozen until 2030 and the benefit will no longer be available to those under 22 years of age.

Those receiving the standard universal credit allowance will see a £14 per week increase to £106 by 2030 – rather than the £15 previously announced.

HOUSING

Planning reforms are expected to enable 170,000 more new homes to be built over the next five years.

The changes, together with investment in affordable housing, is estimated to contribute £6.8bn to GDP by the end of parliament and to grow housing stock by around 1.3m – although this is under the government’s original 1.5m target.

As with all economic statements, many of the figures quoted by the government are estimates and forecasts, meaning that much uncertainty remains over the exact impact they will have on an individual’s particular circumstances.

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