Chancellor Rachel Reeves delivered a pivotal Spring Statement on Wednesday, 26 March 2025, aimed at addressing the UK’s economic challenges and reinforcing the government’s commitment to growth and security. The statement comes amid a backdrop of increased global uncertainty, with the Office for Budget Responsibility (OBR) slashing its growth forecast for 2025 from 2% to just 1%.
In her address to the House of Commons, Reeves announced a £14 billion package designed to repair the economy, which includes cuts to welfare. The Chancellor emphasized the need for immediate action, stating, "I am not satisfied with these numbers," referring to the downgraded growth figures. She indicated that the government is investing £1 billion to provide personalized employment support, aiming to help people back into work and reduce the impact of welfare cuts.
The government’s own impact assessment revealed that these welfare reforms could push an estimated quarter of a million people, including 50,000 children, into relative poverty by the end of the decade. This revelation has drawn sharp criticism from opposition parties, with Shadow Chancellor Mel Stride accusing Reeves of recklessness in her fiscal management.
Despite the gloomy economic forecasts, Reeves highlighted that the OBR has also projected that people will be on average £500 a year better off under her government compared to previous forecasts. She stated, "Our plan to get Britain building will drive growth in our economy and put money in people’s pockets," reinforcing the government’s focus on housing and infrastructure.
Reeves confirmed a significant increase in the Ministry of Defence’s budget, allocating an additional £2.2 billion for 2025-26. This funding is part of the government’s strategy to enhance national security in light of global threats, particularly from Russia. "The world is changing, and Putin is a global threat," she said, outlining plans to invest in advanced military technology and improve living conditions for service members and their families.
As part of her strategy, Reeves announced a series of public spending cuts aimed at balancing the budget without raising taxes. She reassured MPs that day-to-day spending would increase in real terms, above inflation, in every year of the forecast, despite the cuts to welfare. The Chancellor emphasized that the government is committed to running a surplus of £9.9 billion by 2029-30, achieved through spending cuts rather than new taxes.
The Spring Statement also included measures to tackle tax evasion, with Reeves pledging to raise an additional £1 billion in gross tax revenue per year by 2029-30. The government plans to invest in HMRC to enhance its ability to combat tax avoidance, aiming to generate £7.5 billion annually through these efforts. This includes adding 500 new staff to HMRC, building on the 5,000 already announced.
Reeves articulated that the government is focused on delivering stability and growth in a rapidly changing world. She stated, "In an era of global change, we will deliver security for working people and renewal for Britain," indicating a commitment to reforming public services to improve efficiency and effectiveness.
Amidst the economic challenges, the Chancellor noted that capital spending on major projects would not be cut, with plans to increase investment in infrastructure. This includes a £3.25 billion Transformation Fund aimed at reshaping public services and enhancing efficiency through technology and innovation.
In terms of housing, the government aims to deliver 1.3 million homes over the next five years, moving closer to its manifesto pledge of 1.5 million homes. Reeves stated that planning reforms would help achieve the highest level of housebuilding in over 40 years, which is crucial for addressing the housing crisis in the UK.
Reeves faced scrutiny from opposition parties regarding the welfare cuts, with accusations that the government is prioritizing fiscal targets over the well-being of vulnerable populations. Critics argue that the cuts to welfare will disproportionately affect those already struggling, raising concerns about the long-term implications for social equity.
As the Chancellor concluded her statement, she reiterated the government’s commitment to fostering economic growth while managing public finances responsibly. The measures outlined in the Spring Statement reflect a balancing act between immediate fiscal constraints and longer-term objectives for economic stability and growth.
Looking ahead, the government will continue to navigate the complexities of the UK’s economic landscape, with further announcements expected at the Spending Review concluding on 11 June 2025. The Chancellor’s Spring Statement sets the tone for the government’s approach to economic recovery in the face of global challenges, as it strives to create a more secure and prosperous future for all citizens.
