Yesterday, the Chancellor, Rachel Reeves, delivered her Spring Statement to the House of Commons. She announced the government’s economic plans the remainder of the parliament. Cuts to the welfare budget and government running costs were announced. In addition to this, she announced significant investment into areas like defence and housing.
If you missed yesterday’s statement, this guide covers the major announcements that are likely to impact you, your business, and your personal finances.
Tax Updates
While economic growth has been slower than forecasted, the government has opted not to increase personal taxes. Instead, the chancellor plans to generate revenue through enhancing HMRC technology with the aim of reducing tax evasion. Alongside this there will also be reforms to welfare and benefits that are expected to save £4.8 billion by 2030. Additionally, reductions in public sector spending are also on the agenda, including a targeted 15% cut in administrative expenses across government departments by the end of the decade.
Ensure your tax affairs are compliant and efficient by getting in touch with our accountants.
Economic Overhaul
Chancellor Reeves introduced the most significant planning policy reforms seen in decades. According to the Office for Budget Responsibility (OBR), these reforms are expected to prevent breaches of fiscal rules and deliver a long-term economic boost. The reforms, particularly within planning regulations, are projected to lift real GDP by 0.2% by the 2029/2030 fiscal year, injecting an estimated £6.8 billion into the UK economy. Over the coming ten years, overall government strategies are expected to raise GDP by 0.6%.
Although the growth forecast for 2025 has been revised down from 2% to 1%, the outlook for the near future remains positive, with consistent growth projected:
- 2025: 1.0%
- 2026: 1.9%
- 2027: 1.8%
- 2028: 1.7%
- 2029: 1.8%
This equates to a total cumulative GDP growth of 9.4% between 2024 and 2030.
Additionally, Real Household Disposable Income per person is expected to increase by 2.6% throughout the current Parliament. This will equate to an average rise of £500 per household annually. Reeves described this projection as the most substantial growth impact the OBR has ever forecast for a policy that carries no additional fiscal cost.
Welfare Adjustments
In a move to curb public spending, the government aims to reduce welfare expenditure by £4.8 billion annually by the end of the decade. The savings will be driven by more stringent assessments for Personal Independence Payment (PIP), a freeze on incapacity benefits, and halving Universal Credit. Reeves also announced a freeze on new claimants.
Civil Service & Public Sector Modernisation
An investment of £3.25 billion has been allocated to modernise public services. Early funding will focus on streamlining the civil service by reducing headcount, integrating AI tools in the probation system, and boosting support for foster care. The government is targeting a further £3.5 billion in annual cost savings by 2029–2030 through these initiatives.
Defence & Global Security
Amid rising geopolitical instability, the Chancellor reaffirmed a commitment to increased defence spending. An extra £2.2 billion has been added to next year’s defence budget with the goal of increasing military expenditure to 2.5% of national income by 2027. Investments in next-gen technology, including AI and drones, are also expected to create skilled manufacturing jobs in regions such as Glasgow, Derby, Newport, and Barrow.
Housing Development
A cornerstone of Labour’s policy platform, housing remains a top priority. Reeves shared her plans to support the development of 1.3 million new homes. This would move Labour closer to their objective of delivering 1.5 million homes in England over the course of this Parliament.
Capital Investment & Inflation Outlook
The Chancellor also announced an increase of £1.2 billion per year in capital spending to stimulate long-term growth. She noted the UK is progressing toward the Bank of England’s 2% inflation target, with inflation now easing. The OBR expects Consumer Price Index (CPI) inflation to average at 2.3% this year, 2.1% in 2026 and stabilise at the 2% target from 2027.
- 2025: 2.3%
- 2026: 2.1%
- 2027 and beyond: Stabilising at the 2% target
Following today’s statement, there will be a further spending review in June. If you are unsure on how any of this affects you and your business, then please get in touch with our accountants.
