Chancellor Rachel Reeves stood before Parliament on Wednesday to share the UK’s Spring Statement. She spoke about the country’s money troubles and how the government plans to fix them. Reeves explained how the UK will cut spending and move more money to defence.
The Chancellor said the UK faces a growing gap between what it spends and what it earns. To close this gap, she announced plans to reduce public spending, cut welfare costs, and spend more on defence.
Cuts in Welfare and Public Spending
One of the main points in Reeves’ statement was about welfare changes. She said the government will make final reforms to the welfare system. These changes will save £4.8 billion over time. She added that spending on disability and sickness benefits will still rise. But, she expects that the money spent on welfare, compared to the country’s income, will fall after 2026.
Rachel Reeves also promised to help people get back to work. She said the government will spend £1.4 billion on programs to support people returning to jobs. Alongside this, she announced fresh cuts to welfare.
The Chancellor also wants to make public services more efficient. She plans to reduce the public sector’s operational costs by 15%. This will save £2 billion by the year 2030.
Defence Spending to Rise, Foreign Aid Cut
Another big change in the Spring Statement was about defence and aid. Reeves pledged to raise the UK’s defence budget to 2.5% of the country’s total income from April 2027. This is a major boost to military spending.
To make room for this extra defence money, Reeves said the government will reduce foreign aid. The UK’s overseas aid will drop to 0.3% of national income. This change will save £2.6 billion every year by 2029–30.
The Chancellor also promised an extra £2.2 billion for the Ministry of Defence next year. She said this money will help protect the country and grow the economy. Reeves made it clear that national security is a top priority.
Growth Forecasts Lowered for Next Year
The Spring Statement also included fresh news about the UK economy. The Office for Budget Responsibility (OBR) lowered its forecast for next year’s growth. It now expects the economy to grow by only 1% in 2025. Last autumn, the forecast was 2%.
The UK’s economy has been weak since mid-2024. Many businesses are worried about higher taxes and wage hikes set to begin in April. In the last quarter of 2024, the UK’s economy grew by just 0.1%. This news disappointed the new Labour government.
Since the financial crisis of 2008, the UK’s economy has not grown as fast as it used to. Many people worry this trend will continue.
Critics Blame Reeves’ Policies
Some critics believe Chancellor Reeves is making the economy worse. They say she sounded too gloomy when Labour returned to power last July. Others point to her choice to raise business taxes last autumn. They argue these steps have made people and businesses nervous about the future.
Inflation Drops But Will Stay High
Reeves shared some good news about inflation. In February, the rate of inflation fell to 2.8%, down from 3%. However, the OBR now expects inflation to rise again in 2025. It predicts inflation will be at 3.2%, higher than its earlier estimate of 2.6%.
The forecast suggests that inflation will fall to 2.1% in 2026. This is close to the Bank of England’s target of 2%. The OBR believes the UK will meet this goal by 2027.
No New Taxes, But More Crackdowns
The Chancellor ruled out new tax increases in this budget. Last autumn, Reeves had announced £40 billion in new taxes. Now, she expects to collect another £1 billion by cracking down on tax avoidance. These measures will bring the total savings from fighting tax evasion to £7.5 billion.
Deficit to Fall, Surplus in Sight
Reeves shared new figures about the country’s deficit. She expects the UK will have a £36.1 billion deficit in 2025–26. She believes this will shrink to £13.4 billion the following year. By 2027–28, Reeves predicts the country will have a £6 billion surplus.
Mixed Reactions from Experts
Experts have reacted differently to the Spring Statement. Lindsay James from Quilter welcomed the fact that there were no deeper cuts. She said public spending would still grow by 1.2%, down only slightly from 1.3%.
Sarah Coles from Hargreaves Lansdown was less optimistic. She noted that the future growth projections had improved but warned that weak economic growth may force Reeves to raise taxes again in autumn.