Chancellor Rachel Reeves today announced even more cuts to the benefits system and government departments during her Spring Statement. Ms Reeves acknowledged she needs to go “further and faster to kickstart growth”, amid downbeat predictions about her cost-cutting measures and as she scrambled for savings to help balance the nation’s books without hiking taxes.
The Office for Budget Responsibility (OBR) has slashed its forecast for economic growth, following similar recent revisions by the Bank of England and the Organisation for Economic Co-operation and Development (OECD). And the watchdog warned that cuts to welfare set out in recent weeks have fallen short of the £5 billion savings ministers expected, according to media reports, leaving the Chancellor with a £1.6 billion hole.
Reeves argued the UK has to "move quickly in a changing world" and confirmed a £2.2bn increase in defence spending. In benefits she announced Universal credit standard allowance will increase from £92 per week in 2025-26, to £106 per week by 2029-30. However the Universal Credit health element will be cut by 50% and then frozen for new claimants.
The Government has also borrowed more than previously expected, with the cost of those loans rising – in part due to global turbulence. In her spring statement, the Chancellor told MPs that a “more insecure world” requires a greater focus on national security, with a promise to increase defence spending by £2.2 billion from April as part of the previously announced plan for the biggest boost in military funding since the Cold War.
Chancellor Rachel Reeves opened her spring statement saying she was “proud” of what the Government has delivered since the election. She told MPs: “This Labour government was elected to bring change to our country. To provide security for working people and to deliver a decade of national renewal. That work of change began in July – and I am proud of what we have delivered in just nine months.
“Restoring stability to our public finance, giving the Bank of England the foundation to cut interest rate three times since the general election. Rebuilding our public services with record investment in our NHS bringing waiting lists down for five months in a row and increasing the National Living Wage to give three million people a pay rise from next week. Now our task is to secure Britain’s future in a world that is changing before our eyes.”
Chancellor Rachel Reeves said the Office for Budget Responsibility (OBR) has revised the UK growth forecast for 2025 from 2% in the autumn to 1%. She told the Commons: “I am not satisfied with these numbers. That is why we on this side of the House are serious about taking the action needed to grow our economy. Backing the builders, not the blockers, with a third runway at Heathrow Airport and the Planning and Infrastructure Bill.”
Ms Reeves also highlighted reforms to the pension system and a national wealth fund, adding it was part of a “serious plan” for economic growth.
Ms Reeves said debt interest stands at £105.2 billion in the current financial year, noting this is more than the Government allocates on defence, the Home Office and justice combined. She told the Commons: “The responsible choice is to reduce our levels of debt and borrowing in the years ahead so we can spend more on the priorities of working people.
“I said that our fiscal rules were non-negotiable and I meant it. I will always deliver economic stability and I will always put working people first. I said it at the election, I said it at the budget and I say it again today.”
Chancellor Reeves said her spring statement “does not contain any further tax increases” before she highlighted work to tackle tax evasion. She told the Commons: “Today, I go further continuing our investment in cutting-edge technology, investing in HMRC’s capacity to crack down on tax avoidance and setting out plans to increase the number of tax fraudsters charged each year by 20%.
“These changes raise a further £1 billion taking total revenue raised from reducing tax evasion under this Government to £7.5 billion.”
Here is a rundown of the major announcements in today's Spring Statement:
Benefits:
Chancellor Reeves said the Government “inherited a broken system” on welfare, telling MPs: “More than 1,000 people qualify for personal independence payments every single day and one in eight young people are not in employment, education or training.
“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.”
Universal credit standard allowance will increase from £92 per week in 2025-26, to £106 per week by 2029-30, Rachel Reeves told the Commons. The Chancellor added that the Universal Credit health element will be cut by 50% and frozen for new claimants. She said: “The OBR (Office for Budget Responsibility) have said that they estimate the package will save £4.8 billion in the welfare budget, reflecting their judgments on behavioural effects and wider factors.
“This also reflects final adjustments to the overall package, consistent with the Secretary of State’s statement last week and the Government’s Pathways to Work Green Paper.
“The universal credit standard allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30, while the universal credit health element will be cut by 50% and then frozen for new claimants.” Reeves says welfare spending as share of GDP will fall between 2026-27.
The total savings from the package will be £3.4bn, she says, citing a forecast from the OBR. Originally, the government said it would be £5bn.
Getting people back to work:
Ms Reeves told the Commons the government is investing £1 billion to help people back into work. “We are investing £1 billion to provide guaranteed, personalised employment support to help people back into work and £400 million to support the Department for Work and Pensions to deliver these reforms effectively and fairly, taking total savings from the package to £3.4 billion”, she said.
“Overall, these plans mean that welfare spending as a share of GDP will fall between 2026-27 and the end of the forecast period. We are reforming our welfare system, making it more sustainable, protecting the most vulnerable and supporting more people back into work.”
Fraud and tax evasion crackdown:
Ms Reeves said she will go further to crackdown on tax evasion. She says there will be no tax increases as a result, but adds that when working people are paying their taxes, it is not right others are avoiding doing so. They will set out plans today that will "increase the number of tax fraudsters charged each year by 20%".
Reeves says these changes will take the total revenue raised from reducing tax evasion to £7.5bn, which she says has been verified by the Office for Budget Responsibility (OBR).
Spending cuts:
Government departments will have to cut their running costs, the Chancellor said. Overall day-to day-spending across Government will be cut by £6.1 billion in 2029-30 based on what was previously expected.
Government spending will now grow by an average of 1.2% a year above inflation, compared with 1.3% in the autumn. Capital spending on major projects will, however, not be cut, the Chancellor said, claiming the previous government had “choked off growth” by doing so.
The Government will make the state “leaner and more agile”, Ms Reeves said, as she announced a new “Transformation Fund” to reshape the public sector. The work, carried out by the Cabinet Office aims to reduce the costs of running government by 15%, worth £2 billion, by the end of the decade.
“Voluntary exit schemes to reduce the size of the Civil Service” will be part of the £3.25 billion Transformation Fund, the Chancellor said. Other work to drive efficiency in the Civil Service will include encouraging the adoption of new AI tools and other technology.
Building and planning:
Reeves says the planning system that Labour inherited was "far too slow". She says that the OBR has assessed that Labour's planning reforms "will lead to housebuilding reaching a forty year high". Changes to the national planning policy alone, she adds, will help build over 1.3 million homes in the UK within the next five years.
This will take Labour within "touching distance" of its promise to build 1.5 million homes in England this parliament, she says .Growth will take hard yards, Reeves says. In her first week as chancellor, she announced they were pursuing the most ambitious set of planning reforms in decades.
Reeves says that the OBR have today concluded that these reforms will permanently increase the level of real GDP 0.2% by 2029-30 - an additional £6.8bn in our economy, and by 0.4% of GDP within the next 10 years - an additional £15.1bn in our economy. Reeves says this is the "biggest positive growth impact that the OBR have ever reflected in their forecast, for a policy with no fiscal cost".
Defence Spending:
First, she says defence spending will increase to 2.5% of GDP, by reducing overseas aid to 0.3% of gross national income. Reeves says this will "save £2.6bn in day-to-day spending in 2029-30 MsReeves has allocated an additional £2.2 billion to the Ministry of Defence’s budget for next year. She said: “Today I confirm that I will provide an additional £2.2 billion for the Ministry of Defence next year, a further down payment on our plans to deliver 2.5% of GDP. This additional investment is not just about increasing our national security, but increasing our economic security, too.”
Chancellor Rachel Reeves has pledged to “boost Britain’s defence industry and to make the UK a defence industrial superpower”. She added: “We will spend a minimum of 10% of the Ministry of Defence’s equipment budget on novel technologies including drones and AI (artificial technology) enabled technology.
“Driving forward advanced manufacturing production in places like Glasgow, Derby and Newport, creating demand for highly-skilled engineers and scientists, and delivering new business opportunities for UK tech firms and start-ups.”
Fiscal rules:
Reeves spoke about the fiscal rules she set out in October Budget - calling them "non-negotiable". She says they will bring "stability" to the economy and "security" for working people. She refers next to Liz Truss's mini-budget, saying the British people have seen what happens "when a government borrows beyond its means".
Reeves told the Commons that she’s sticking to her fiscal rules. The first is balancing the budget by 2029/30, so that day to day spending is met by tax receipts, she says. The second is that debt falls by the end of the forecast period to 2029/30. She says that according to the OBR forecast, the current budget would have been in deficit by £4.1bn in 2029-30, having been in surplus by £9.9bn in the autumn. The chancellor says that due to her steps today, she has “restored in full our headroom against the “stability rule”.
She says this means “moving from a deficit of £36.1bn in 2025-26 and £13.4bn in 2026-27, to a surplus of £6.0bn in 2027-28, £7.1bn in 2028-29 and £9.9bn in 2029-30”. Reeves says the country will therefore meet the stability rule “two years early”.
Investment in public service change
Ms Reeves said the Government’s transformation fund will introduce “voluntary exit schemes to reduce the size of the civil service”. She told MPs: “That is money brought forward now to bring down the costs of running Government by the end of the forecast period by making public services more efficient and more productive.
“I can confirm today the first allocations from this fund include funding for voluntary exit schemes to reduce the size of the Civil Service, pioneering AI tools to modernise the state, investment in technology for the Ministry of Justice to deliver probation services more effectively, and up-front investment to support children in foster care to give them the best start in life and reduce cost pressures in the future. Our work to make Government leaner, more productive and more efficient will help deliver a further £3.5bn of day-to-day savings by 2029-30.”
