Spring Statement 2025: Key Announcements and Economic Outlook

Chancellor Rachel Reeves has unveiled a series of significant changes to the UK’s economic strategy during her Spring Statement in the House of Commons. The statement coincided with the release of the latest economic projections by the Office for Budget Responsibility (OBR), which has assessed the government's spending and economic outlook.

Here are the key highlights from the Spring Statement:

Welfare Reforms

The government is introducing significant changes to the welfare system, particularly targeting universal credit and disability benefits:

• Health-related universal credit for new claimants will be frozen in cash terms until 2030.
• The standard allowance for universal credit will now rise to £106 per week by 2030.
• For existing claimants, health-related universal credit payments will remain frozen in cash terms until 2030.
• Starting in November 2026, personal independence payments (PIP), the key disability benefit, will face a stricter eligibility assessment.
• Incapacity benefits will also be frozen for existing claimants at £97 per week, with additional top-up payments for those suffering from the most severe conditions.
• Young individuals under 22 will no longer be eligible for the incapacity benefit top-up under universal credit.

Economic Forecasts

The OBR’s latest projections show a mixed outlook for the UK economy:

• The OBR has revised its growth projections, lowering the expected growth for 2025 from 2% to 1%. However, growth expectations for the next few years have been upgraded. Growth is projected to be 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.
• Inflation is forecast to average 3.2% this year, higher than the previous forecast of 2.6%. However, inflation is expected to fall to 2.1% by 2026 and reach the government’s 2% target by 2027.
• The OBR also highlights that changes to the planning system in England are expected to increase the size of the economy by 0.2% by 2030.

Defence and Overseas Aid Spending

Defence and international aid were also prominent topics in the Spring Statement:

• Defence spending, initially set to increase by £2.9 billion next year, will now see an additional £2.2 billion boost. This will raise military spending to 2.36% of national income in 2026, with plans to further increase it to 2.5% by 2027.
• To fund this increase, the government intends to reduce overseas aid from 0.5% to 0.3% of gross national income by 2027, with some funding also coming from Treasury reserves.

Public Service Efficiencies

In a bid to streamline government operations, Chancellor Reeves has outlined several cost-saving measures:

• The government has set a target to cut administrative costs in government departments by 15% by 2030.
• Around 10,000 civil service jobs are anticipated to be eliminated, particularly in areas like human resources, policy advice, communications, and office management.

In conclusion, Chancellor Rachel Reeves' Spring Statement outlines key changes to welfare, defence spending, and public service efficiency, alongside updated economic forecasts. While growth projections have been revised downward in the short term, the government's focus remains on fiscal discipline and boosting long-term economic stability.