Chancellor Rachel Reeves delivered the latest Spring Statement yesterday, outlining plans for the economy with a focus on welfare reforms, defence spending, and public sector cuts.
Here’s a breakdown of the key announcements:
The economy
The Office for Budget Responsibility (OBR) downgraded predicted growth for the remainder of 2025 from 2% to 1%, however, there is growth on the cards for the next four years of 1.9% in 2026, 1.8% in 2027, then 1.7% in 2028, and 1.8% in 2029.
Inflation forecast to average 3.2% this year, up from 2.6% previously forecast, before falling back to 2.1% in 2026.
Welfare reforms
Perhaps the most highly anticipated part of her Statement, the Chancellor announced major adjustments to welfare benefits.
The standard allowance for universal Credit is set to rise from £92 per week in 2025-26 to £106 per week by 2029-30. However, new claimants will see a 50% reduction in the health element, which will then be frozen.
Eligibility criteria are tightening from November 2026 for the Personal Independence Payment (PIP) and by 2028, PIP assessments will replace Work Capability Assessments for determining Universal Credit health supplements.
Jobseeker and support allowances will merge into one, offering time-limited support based on National Insurance contributions.
Defence and Foreign Aid
With global uncertainties on the rise, the government is making strategic financial decisions including an extra £2.9 billion boost in defence spending next year. This will be funded by reducing overseas aid to 0.3% of gross national income, saving approximately £2.6 billion by 2029-30.
Public sector and taxation
The Chancellor emphasised cost-cutting measures across government departments, reducing administrative costs of 15% by 2030. Plus, up to 10,000 civil service jobs could be cut and non-health and defence departments could face budget reductions of 11%.
A push to increase prosecutions for tax fraud by 20% annually hopes to raise £1 billion.
Housing
In an effort to address the housing crisis, the government announced new initiatives:
£2 billion will be allocated to build 18,000 affordable and social homes, contributing to a wider goal of 1.5 million new homes during this parliamentary term.
There will also be a £625 million package available to boost skills in the construction sector, aiming to train up to 60,000 more workers to support the government's plan to deliver 1.5 million homes and infrastructure projects.
Contact Richard Clapham
