Deciphering the Spring Statement 2025

Edward Willday

2 mins

On Wednesday 26th March, Chancellor Rachel Reeves spoke in Parliament to give an update on the UK’s economy, in the Spring Statement. A summary of the Office for Budget Responsibility’s (OBR) forecast for the UK economy was given before the Chancellor announced measures to boost the UK’s economic landscape. As expected by analysts in advance of the Spring Statement, no new major policy announcements were made and Reeves re-affirmed her commitment given in October 2024 to a single Budget per year. In this article, we’ll run through key points from the Spring Statement and help to decipher the jargon.

The Houses of Parliament as seen from across the river Thames. Big Ben is seen on the right of the picture with Parliament to its left.

The Chancellor’s fiscal rules

Chancellor Reeves confirmed that despite challenging economic times and the changing world we live in, the fiscal rules she set out in October 2024 remain non-negotiable. The first fiscal rule is concerning economic stability, and maintaining control of government spending. Reeves previously pledged that the government should not need to borrow more in order to cover day-to-day spending. In the Spring Statement she advised that this spending should be met by tax receipts. The second fiscal rule is surrounding the use of investment to drive growth in the economy. To meet this fiscal rule, the UK’s net financial debt must fall by the end of the 2029/2030 forecast period.

In order to meet these fiscal rules, and as a result in the changes in the global economy since her Autumn Statement in October 2024, Reeves has made some adjustments to previous announcements. Her announcements covered welfare spending, defence spending and a policy to “Get Britain Building Again”. We’ll take a look at each of these, below.

Welfare

In the week running up to the Spring Statement, there were a number of announcements regarding welfare spending. A stricter eligibility test will be in place for Personal Independence Payments (PIPs) from November 2026. This is the main disability benefit available, and by tightening the eligibility criteria, the Chancellor expects significant savings to be made.

Changes were announced for Universal Credit, too. The standard allowance for Universal Credit will increase from £92 per week in 2025/26 up to £106 per week by 2030. It was announced that the health element of Universal Credit will be cut by 50% to £50 per week for new claimants in 2026/2027, before being frozen. It was also announced that this portion of Universal Credit entitlement for existing claimants will be frozen at £97 per week until 2029/30.

The government plans to introduce a new “Unemployment Insurance” benefit, merging the current new-style Jobseeker’s Allowance and Employment and Support Allowance. This change will streamline support for people out of work, but with tighter eligibility rules and a capped entitlement period, aiming to encourage quicker returns to employment and reduce long-term welfare costs.

Defence Spending

The Chancellor announced an increase to defence spending of 2.5% of GDP. She asserted that this would lead to new business opportunities for small businesses, as well as for companies in the technology sector. This increased spending will be offset by the decrease in overseas aid to 0.3% of gross national income.

Get Britain Building Again

An area of growth that the Chancellor discussed was in the construction and housing industries. Reeves pledged that over 1.3 million homes will be built within the next 5 years. This will increase employment across the regions, within these sectors.

Rachel Reeves also announced that £600 million has been set aside to train up to 60,000 more construction workers. This investment includes the creation of ten new technical colleges across all regions of the UK.

A construction worker with tool belt and hard hat on in the wooden frame of a house being built.

Target for growth

There is a pre-existing target of 2% for inflation in the UK. The rate of inflation rose to a peak of 11% in 2022, and is currently at 3%. The Chancellor determined that inflation will meet its 2% target by 2027.

As with many global economies, UK growth has not been as great as was previously forecast. As such, the OBR have revised their growth forecast for the UK economy down from 2% to 1%. The Chancellor asserted that she is determined to beat this new, lower target. She intends to do so through planning reforms and increasing investments through pension reform and the National Wealth Fund. You can find out more about the proposed pension reforms in our earlier blog post.

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For further information about the previously announced policy changes that come into force from April 2025, don’t miss our previous post that breaks them down.

We hope that this has helped you understand the announcements in the Spring Statement, and how it will impact you. If you have any further questions, please don’t hesitate to contact us.