Spring Statement 2025: Rachel Reeves’s key announcements

Chancellor Rachel Reeves has delivered the Government’s Spring Statement, providing a troubling economic update and outlining fiscal adjustments. 

This was not a full Budget. Chancellor Rachel Reeves reiterated her commitment to one major fiscal event annually, but it included significant policy shifts affecting public finances, welfare, and defence. 

Rachel Reeves has ruled out tax rises for now, but a number of tweaks and buried items in the Government’s documents suggest more could be on the horizon.

Below is a detailed breakdown of the key points and their implications for UK households and taxpayers.

Rachel Reeves downbeat economy

The Office for Budget Responsibility (OBR) revised its 2025 GDP growth forecast from 2% to 1%, citing global trade tensions, including new 25% US tariffs on cars and parts, and a slower domestic recovery. 

Inflation is projected at 2.8% in 2025, with the Bank of England maintaining interest rates at 4.5%. Longer-term forecasts show slight improvement, with growth rising to 1.9% in 2026 and averaging 1.7-1.8% through 2029. 

The OBR estimates real household disposable income could increase by £500 annually by 2029-30, compared to the previous government’s final Budget, assuming tax thresholds are adjusted.

Public sector net borrowing is expected to fall from £112 billion in 2025-26 to £58 billion by 2029-30, reflecting tighter fiscal control. 

However, the OBR notes this trajectory leaves limited room for economic shocks, with debt peaking at 96.8% of GDP in 2027-28 before declining slightly.

Fiscal discipline 

Rachel Reeves adhered to her fiscal rules: balancing day-to-day spending with revenue and managing debt levels. 

Without adjustments, the budget would have faced a £4.1 billion deficit by 2027-28. Instead, measures secure a £6 billion surplus in 2027-28, rising to £9.9 billion by 2029-30. 

This ‘headroom’ is narrow, with the OBR warning it could vanish if growth falters further or external pressures mount.

Welfare cuts

Welfare spending faced significant reductions. From April 2026, new claimants of health-related Universal Credit will receive £50 weekly instead of £97, with payments frozen until 2030. Under-22s will be ineligible for this element. 

Existing claimants retain £97 weekly until 2030, though a severe conditions top-up is planned. 

The standard Universal Credit allowance will rise from £92 to £106 weekly by 2029-30, a £14 increase over five years. These changes are projected to reduce welfare spending by £3.2 billion annually by 2029-30. 

Analysis suggests three million households could lose £1,720 yearly on average, pushing 250,000 people, including 50,000 children, into relative poverty. 

Reeves allocated £1 billion for employment support, aiming to offset cuts by boosting workforce participation.

Rachel Reeves leaves taxes unchanged, for now

No new tax rises were announced, aligning with Reeves’ pledge to avoid mid-year hikes. 

However, measures from the Autumn Budget persist: employer National Insurance rises from 13.8% to 15% in April 2025, and personal tax thresholds remain frozen until 2028-29. 

This fiscal drag will increase the tax burden, with revenue projected at 37.7% of GDP by 2029-30, a post-war high. 

Late payment penalties for self-assessment tax will double to 10% from April 2026, raising an estimated £200 million annually.

In the follow up documents from the Government on the Spring Statement, the Government confirmed it was making rules around late filing of self assessment tax returns harsher, with bigger penalties for late filing.

It also announced that parents who face paying the High Income Child Benefit Charge will no longer have to file a self assessment but instead will be able to use a digital service that repays their child benefit through PAYE. 

Finally, the Government announced it is looking at reforms to the ISA allowance and whether it can be better used to promote private investors and UK growth.

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Household impact

For households, the Spring Statement offers little immediate relief. Mortgage holders face sustained pressure with interest rates at 4.5% and renters see no respite from rising costs as welfare support tightens. 

The £500 projected rise in disposable income by 2029-30 hinges on future growth and tax adjustments, offering a distant prospect rather than immediate help. 

Low-income families, particularly those on benefits, will feel the welfare cuts most acutely, with the Resolution Foundation estimating a 2% drop in real income for the poorest fifth of households by 2027.

The 2025 Spring Statement prioritises fiscal stability over bold intervention, trimming welfare and boosting defence while holding the tax line. 

For UK households, it’s a lean outlook. Slower growth, tighter benefits and no quick fixes. 

Reeves is betting on long-term discipline paying off, but with global risks looming, the margin for error is slim.

Photo courtesy of HM Treasury Flickr