What You Need to Know About the Spring Statement 2025

Rachel Reeves delivered her Spring Statement and she blamed a blow to Britain’s finances on global chaos caused by Donald Trump.

In her Spring Statement, viewed as another Budget, the Chancellor blamed a world “changing before our eyes” as she slashed disability benefits and spending by Whitehall departments.

She told MPs: “The job of a responsible government is not simply to watch this change.

“This moment demands an active government. A government not stepping back, but stepping up.

“A government on the side of working people, helping Britain reach its full potential.”

The cuts came against a backdrop of deteriorating government finances, with the Office for Budget Responsibility (OBR) halving its growth forecast for 2025.

Ms Reeves confirmed there would be no new tax rises, although a previously announced £40 billion tax raid will still come into force next month.

Here are the key points in the Spring Statement:

Economic growth forecast halved

The OBR has halved its 2025 growth forecast to just 1%, dealing a blow to the Government’s economic growth plans.

Ms Reeves said she was “not satisfied” with the figures but argued that upcoming policies—including Heathrow’s third runway, planning system reforms, and investment in pensions and the National Wealth Fund—would boost growth.

She added that the OBR had raised its forecasts for 2026 and beyond.

Record tax burden

Ms Reeves ruled out further tax hikes on Wednesday, but the OBR warned that Britain’s tax burden will reach a record share of GDP under Labour.

By 2027-28, taxes are set to rise to 37.7% of GDP—higher than the 37.1% peak forecast in Jeremy Hunt’s Spring Statement last year.

Critics say the £40 billion tax increases announced in October will hit businesses and households hard.

Key measures, including a National Insurance hike, an income tax threshold freeze, and a stamp duty rise, take effect next week.

Budget deficit averted

The OBR had projected a £4.1 billion budget deficit by 2029-30, a sharp contrast to the £9.9 billion surplus forecast in October.

However, Ms Reeves said the measures announced in the Spring Statement would restore the surplus to £9.9 billion.

Welfare cuts

Ministers had signalled £5 billion in welfare cuts this week, but Ms Reeves confirmed further changes in her Spring Statement.

The original plans were expected to save more, but the OBR now estimates the package will reduce the welfare bill by £4.8 billion a year.

The reforms include changes to disability and sickness benefits, as well as new adjustments to Universal Credit incapacity benefits.

Ms Reeves said the Universal Credit standard allowance would rise from £92 per week in 2025-26 to £106 per week by 2029-30. However, the health element will be cut by 50% and frozen for new claimants.

She told MPs:

“We believe that if you can work you should work and if you can’t, you should be properly supported.”

“If we do nothing, that means we are writing off an entire generation. That cannot be right. It is a waste of their potential and it is a waste of their futures.”

The Government is also set to publish an impact assessment outlining how many people will be affected by the changes.

Whitehall spending axed

Ms Reeves pledged to “fundamentally reform the British state” as she axed Whitehall spending.

Efficiency savings will aim to cut the running costs of government by £2 billion by the end of the decade.

She also announced a £3.25 billion “transformation fund” that will fund new artificial intelligence (AI) software, new computer systems for the Ministry of Justice, support for children in foster care and a round of civil service voluntary redundancies.

Overall she said a “leaner” government would spend £6.1 billion less on day-to-day operations by 2029-30.

It has been speculated that as many as 50,000 Civil Service jobs could be cut.

Defence down payment

The Chancellor pledged to make Britain “a defence industrial superpower” as she set out plans to plough more cash into high-tech weaponry such as drones.

Earlier in March, Sir Keir Starmer announced that spending would rise from 2.3pc of GDP to 2.5pc by 2027.

In a bid to show the benefits of this to Britain, Ms Reeves confirmed a “down payment” of £2.2 billion would be handed to the Ministry of Defence in 2026.

This is partly expected to be used partly to modernise crumbling accommodation blocks used by forces personnel, amid a recruitment crisis.

But Ms Reeves also announced that “a minimum” of 10pc of the defence budget would in future go toward “novel technologies including drones and AI-enabled technology”.

A protected budget of £400 million for defence innovation aimed at bringing new technology to the frontline “at speed”.

Planning boost

Ms Reeves doubled down on the Government’s commitment to unleash a wave of housebuilding across the country, hailing the economic boost it could deliver.

Reforms proposed in the planning and infrastructure bill will reintroduce mandatory housing targets for councils and loosen restrictions on building on the Green Belt.

By the end of the decade, they will boost GDP by £6.8 billion a year, rising to £15.1 billion within a decade, the Chancellor said.

Taken together with planned spending on major projects, it would boost GDP by 0.6pc in the next 10 years, she added.