Spring Statement 2025: Background briefing

On 26 March 2025, the Office for Budget Responsibility (OBR) will publish revised forecasts for the economy and public finances. The OBR is the independent public finances watchdog, which produces the official forecasts for the economy and public finances used by the Chancellor. It must produce two forecasts each financial year. In each forecast the OBR judges whether the Chancellor is on course to meet their targets for the public finances (often referred to as the fiscal rules).

The Chancellor will respond to the forecast in her Spring Statement in the House of Commons. The Spring Statement was expected to largely be a response to the OBR’s forecast but there is speculation that there will also be announcements on spending and, possibly, tax, to ensure the fiscal rules are met.

What is the international and economic backdrop?

A lot has changed since the Chancellor delivered the Budget in autumn 2024, particularly geopolitically.

The Trump administration’s imposition of tariffs (and threat of tariffs) on trading partners has disrupted the global trading environment. The UK, and other European nations, are increasing defence spending following President Trump’s softening towards Russia and criticism of NATO.

In the UK economy, growth has been modest since mid-2024. Business sentiment has weakened with business groups voicing concerns over upcoming tax increases and the above-inflation rise in the minimum wage, both taking effect in April. The OBR is likely to lower its gross domestic product (GDP) growth forecast for 2025.

sources: ONS, quarter-on-quarter GDP growth, series IHYQ; S&P Global UK PMI, services (PDF) and manufacturing sectors and past surveys

The government has said that economic growth is its number one priority. The government has said it intends to speed up infrastructure approvals, build more homes, and reduce the administrative costs of regulation for businesses.

What are the UK’s fiscal rules?

The UK’s fiscal rules (also known as the fiscal targets) focus on the government’s day-to-day budget (or current budget) and public sector net financial liabilities (PSNFL).

The current budget measures the difference between government current spending (day-to-day spending on running public services, grants and administration) and government revenues from taxes and other sources. The current budget excludes investment spending.

PSNFL is a measure of all the government financial assets and liabilities. It is a wider measure of the government’s balance sheet than the traditional measure of public sector net debt. The government describes PSNFL as “net financial debt”.

source: OBR. Economic and fiscal outlook, October 2024. Chart B.1

Currently, the targets are that in the OBR’s forecast for 2029/30:

• The day-to-day budget (or current budget) should be in surplus. This means that government’s day-to-day spending should be met by its revenues. The government would, therefore, be forecast to only be borrowing for investment (capital) spending.
• Public sector net financial liabilities should be falling, relative to the size of the economy, compared with the previous year (2028/29).

The Library briefing The UK’s fiscal targets explains the targets and what they measure.

What is expected in the Spring Statement?

The Chancellor wants to only make major tax and spending announcements once a year, in the Budget. It was therefore expected that the Spring Statement would be limited, with the Chancellor largely responding to the OBR’s second forecast of the financial year. However, there is now speculation that there might also be some policy announcements.

In its forecast, the OBR will judge whether the Chancellor’s fiscal rules for the public finances are being met. The rules were being met by a relatively small margin in the autumn 2024 forecast. With some unfavourable economic data since, there is speculation that one or both rules might be breached if the Chancellor doesn’t act. The government says it will “meet the fiscal rules at all times”, which suggests the Chancellor will act if required.

source: OBR. Economic and fiscal outlook, October 2024 chart 7.4

Broadly speaking, acting to meet the current budget rule would mean decreasing government spending or increasing tax revenues, in the forecast for 2029/30. 2029/30 is the year in which the fiscal rules are judged. For instance, the Chancellor could reduce departments’ planned day-to-day spending on running public services, grants and administration, in 2029/30.

Ahead of the Spring Statement, the government has set out proposals to reform disability-related benefits, potentially saving around £5 billion in 2029/30. The green paper announcing proposals to reform disability-related benefits was published on 18 March 2025. The proposals aim to prevent long-term economic inactivity, reform the disability benefits assessment process, deliver improved employment support, ensure the benefits system is “financially sustainable”, and protect disabled people who can’t and won’t ever be able to work.

Further information

The Library will publish a summary of the Spring Statement on the evening of 26 March 2025.

The latest data for the UK economy are summarised in the Library’s economic indicators collection. The Library’s economy dashboard provides an overview of the latest economic data.