Chancellor says, ‘No shortcuts to economic growth; it will require long-term decisions.’
Chancellor Rachel Reeves said that the Office for Budget Responsibility (OBR) has downgraded growth projections for 2025 but has upgraded forecasts for every year thereafter for the remainder of this parliament. She told MPs: ‘There are no shortcuts to economic growth. It will require long-term decisions. It will demand hard work. It will take time for the reforms we are implementing to have an impact on the everyday economy.’
Our Guide to Spring Forecast Statement 2025 summarises the key points announced.
Economy
- The Office for Budget Responsibility (OBR) downgrades growth forecast from 2% to 1%.
- Growth estimates for the next four years upgraded: 1.9% next year, 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029.
- Inflation forecast: 3.2% average this year (up from 2.6% previously forecast), 2.1% in 2026.
- 2% inflation target set to be achieved by 2027.
- Last year’s changes to England’s planning system to boost housebuilding by 170,000 over five years, adding 0.2% to the economy.
Spending
- Without action, the OBR announced the government would miss its 2030 target of the spending vs. taxes balance rule.
- Due to higher debt costs, Treasury announced £9.9bn headroom from October’s Budget wiped out.
- Public debt projected to fall as a share of the economy remains at a 51% likelihood.
Welfare
- Health-related universal credit for new claimants to be halved from April 2026 and frozen in cash terms until 2030.
- Universal credit standard allowance to rise to £106 per week by 2030 (down from £107 previously planned).
- Stricter eligibility tests for Personal Independence Payments (PIPs) from November 2026.
- Incapacity benefits will be frozen at £97 per week for existing claimants from April 2024, with top-up payments for severe conditions remaining.
- No universal credit incapacity benefit claim top-ups for under-22s.
Defence and overseas aid
- An additional £2.2 billion in funding will be allocated to the Ministry of Defence (MOD) in the coming year.
- Military expenditure to reach 2.36% of national income next year, aiming for 2.5% by 2027.
- Spending to be funded by reducing overseas aid from 0.5% to 0.3% of gross national income in 2027 and Treasury reserves.
Public services
- Government departments to reduce administrative costs by 15% by 2030.
- Around 10,000 civil service jobs are to be cut, including roles in HR, policy advice, communications and office management.
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