Last updated: 26 Mar 2025 02:00 Posted in: AIA
The UK’s Chancellor of the Exchequer Rachel Reeves has outlined economic measures in her Spring Statement, pledging to “secure Britain’s future” amid financial challenges. She confirmed no new tax rises beyond those previously announced but detailed spending cuts and a crackdown on tax evasion.
The Office for Budget Responsibility (OBR) halved its 2025 growth forecast from 2% to 1%. Reeves insisted planned investments, including Heathrow expansion and pension reforms, would boost growth. Despite earlier projections of a £4.1bn deficit by 2029/30, she claimed new measures would return the budget to a £9.9bn surplus. Inflation fell to 2.8% in February, though further cost pressures are expected.
A £5bn welfare cut will reduce Universal Credit’s health element by 50% for new claimants, while the standard allowance rises to £106 per week by 2029/30. Whitehall will cut operating costs by 15%, saving £2bn, alongside a £3.25bn investment in AI and digital systems.
Defence spending will rise, with £2.2bn allocated next year and 10% of the budget dedicated to emerging technologies. Reeves also announced measures to recover £7.5bn in unpaid taxes, though previously announced tax hikes—including a National Insurance rise—will take effect next month.
As part of the fiscal tightening, Reeves confirmed reductions in overseas aid spending from 0.5% to 0.3% of gross national income in 2027.
The government also announced some important policy developments for Making Tax Digital (MTD) for Income Tax which, collectively, clarify and improve key areas of policy design and support HMRC's delivery plans, including the qualifying threshold for MTD for Income Tax of £20,000 being effective from April 2028.
Defending her approach, Reeves said the government must “step up, not step back” to support economic stability and growth.
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