Chancellor Rachel Reeves recently delivered her Spring Statement to Parliament, setting out the government’s economic priorities. The Office for Budget Responsibility (OBR) also released updated forecasts, providing insight into the UK’s financial outlook.

The statement covered a wide range of issues, including welfare, economic growth, housing, public spending, and defence. Here’s a breakdown of the main announcements and what they could mean.

Welfare Reforms

The government is introducing changes to health-related benefits and Universal Credit in an effort to control spending and refocus support.

  • Health-related Universal Credit for existing claimants will remain at £97 a week until 2030, with no rise in line with inflation. A new top-up payment will be introduced for those with the most serious conditions.
  • New claimants will receive £50 a week from 2026, as planned, but this will not increase with inflation until after 2030.
  • Under-22s will no longer qualify for the health-related element of Universal Credit.
  • The standard Universal Credit allowance will increase by £14 a week by 2030 – £1 less than previously announced.
  • Personal Independence Payment (PIP) will have stricter eligibility criteria from November 2026.

These changes aim to reduce long-term welfare spending but could affect lower-income and disabled individuals.

Economic Forecasts

The OBR has revised its economic outlook:

  • 2025 growth has been downgraded from 2% to 1%.
  • Growth projections for the following years have been raised: 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.
  • Inflation is expected to average 3.2% this year (up from 2.6%), fall to 2.1% in 2026, and reach the 2% target in 2027.

Overall, the long-term picture is more positive than the short-term.

Housing and Construction

The government plans to increase housing supply and boost construction skills.

  • Planning changes announced last year are expected to lead to 170,000 new homes in England over five years.
  • This is forecast to grow the economy by 0.2% by 2030, and 0.4% by 2035.
  • £625 million will be invested over four years to train more construction workers.

These measures aim to address housing shortages and support economic growth through infrastructure.

Public Finances and Spending Rules

The Chancellor is seeking to restore fiscal discipline after rising debt costs put pressure on previous forecasts.

  • Without action, the government would have missed its 2030 spending rule by £4.1 billion.
  • Spending cuts and additional tax revenues have restored a £9.9 billion buffer, meeting the fiscal rule.
  • The chance of hitting the spending target is now 54%, up from 51% last October. The likelihood of meeting the debt reduction target remains at 51%.

Defence and Overseas Aid

The government will increase defence spending while cutting overseas aid.

  • Defence spending will rise by £2.9 billion next year, followed by a further £2.2 billion.
  • Military spending will reach 2.36% of national income in 2026, with a target of 2.5% by 2027.
  • This will be partly funded by cutting overseas aid from 0.5% to 0.3% of national income in 2027 and using Treasury reserves.

Public Services and Civil Service Cuts

The government plans to reduce civil service costs and slow spending growth.

  • Day-to-day spending will grow by 1.2% per year in real terms after 2026, slightly less than the previous 1.3%.
  • Government departments are expected to cut administrative costs by 15% by 2030.
  • Around 10,000 civil service jobs will be cut, mostly in HR, policy, communications, and office management.

These cuts are part of a wider effort to reduce bureaucracy and lower costs.

Tackling Tax Avoidance

The government announced new steps to improve tax compliance.

  • 400 new HMRC staff will be hired to tackle offshore tax avoidance, expected to raise £500 million over five years.
  • A new US-style whistleblower scheme will reward informants with a portion of recovered funds.

These measures are intended to ensure better enforcement and increase tax revenues.

Conclusion

The Spring Statement sets out a cautious but focused economic plan. With modest spending increases, tighter welfare rules, and targeted investments, the government aims to improve growth and manage public finances. While some measures may be controversial, especially in welfare and overseas aid, they form part of a broader strategy to balance economic stability with long-term planning.