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Spring Statement 2025

Taylor Keeble
Mar 31
2 min read

The Chancellor presented her Spring Statement to Parliament on 26 March 2025. No tax changes were announced and the focus was on cuts to government spending due to a slowdown in growth.

Here is a breakdown of the key announcements:

Increased global uncertainty was highlighted, driven by the economic impact of the war in Ukraine, pressure to increase defence spending due to Russian aggression, and Donald Trump's plan to impose tariffs on US imports.
The Office for Budget Responsibility (OBR) reduced its UK growth forecast for 2025 from 2% to 1%. While average inflation is projected at 3.2% overall, the OBR predicts inflation will fall to 2.1% in 2026 and 2% in 2027.
Following the October Autumn Budget, the OBR forecasted spending headroom of £9.9 billion in 2029. However, due to global turmoil over the past six months, the government now faces a £4.1 billion deficit in day-to-day spending. The Chancellor believes that spending cuts will restore the headroom in full, with a surplus of £6 billion expected in 2027/28, rising to £9.9 billion by 2029/30.
The Chancellor announced welfare reductions, including a 50% cut to the Universal Credit health element and a freeze for new claimants. The OBR confirmed these cuts will save £4.8 billion. Despite this, the Universal Credit standard allowance will increase from £92 per week in 2025/26 to £106 per week by 2029/30.
The Cabinet Office aims to reduce the cost of running the government by 15% by the end of the decade, saving £2 billion. The Chancellor assured that capital spending on major projects would remain intact. Instead, a £3.25 billion transformation fund will be introduced for the public sector, which will include voluntary exit schemes to reduce the civil service workforce and expand AI use in Whitehall.
While no new tax increases were announced, the Chancellor pledged to reduce tax evasion using cutting-edge technology, which is expected to save £7.5 billion per year.
The Chancellor confirmed a £2.2 billion increase in defence spending starting in April. This increase will be funded by reallocating money from the foreign aid budget, the Treasury reserve, and the scrapping of NHS funding.
The OBR predicts that housebuilding will reach its highest level in 40 years. Planning reforms are expected to generate an additional £2.4 billion to support public finances and public services by the end of the decade.