Chancellor of the Exchequer Rachel Reeves will deliver the UK’s Spring Statement today, March 26, 2025, at around 12:30 PM GMT, following Prime Minister’s Questions in the House of Commons.
The Spring Statement is a mid-year economic update that provides an indication of the nation’s economic health and introduces updates to economic policy. This year’s statement is likely to address several areas:
Economic Growth and Fiscal Pressures
The UK’s economic growth is sluggish, and the Office for Budget Responsibility (OBR) will cut the 2025 growth forecast from 2% to 1%. High borrowing rates and higher government debt, currently 95.5% of GDP, have increased fiscal pressures.
Spending Cuts and Welfare Changes Proposed
To address the fiscal deficit, Chancellor Reeves will probably announce significant reductions in spending in various government departments that may amount to billions of pounds over the next four years. The precise actions may include limiting access to the Personal Independence Payment and freezing other Universal Credit payments until 2030, aiming to save approximately £500 million by that time.
Defense and Housing Investments
Despite the austerity measures, the government will invest an additional £2.2 billion in defense, bringing it to 2.36% of GDP, with a target of 2.5% by 2027. An additional £2 billion of investment in affordable housing is also proposed to finance the construction of 18,000 affordable and social homes, towards the goal of building 1.5 million homes in the current parliament.
Possible Tax Changes
There is speculation that the Chancellor will extend the freeze on income tax thresholds beyond the current 2028/29 terminal date. This move would create “fiscal drag,” where more and more individuals are pulled into higher tax brackets as their earnings increase, thus boosting tax revenues without even altering tax rates.
Chancellor Reeves’ speech is expected to be short, around 25 minutes, sketching out the government’s strategy to navigate the current economic challenges while trying to fulfill its policy commitments.
