Spring Statement 2025: A summary

The Chancellor of the Exchequer, Rachel Reeves, presented her 2025 Spring Statement to Parliament on 26 March and published supporting documents on the gov.uk website.

When the Chancellor finished her statement in the Commons, the Office for Budget Responsibility (OBR) published updated forecasts for the UK’s economic and fiscal outlook. The OBR is the independent public finances watchdog that produces the official forecasts for the economy and public finances used by the Chancellor.

While the Chancellor announced policy measures, this was a much smaller affair than the 2024 Autumn Budget. The Chancellor adjusted spending plans and made some other changes to ensure she continues to meet her “non-negotiable” fiscal rules.

The Chancellor said the “world is changing before our eyes” referring to Russia’s invasion of Ukraine and uncertainty in global trade policy. She said that the government’s choices were “delivering security for our country and security for working people”.

OBR forecasts

Economy

The OBR halved its forecast for GDP growth in 2025, from 2.0% to 1.0%, but slightly raised its forecasts for subsequent years, as shown in the chart below.

The OBR says the risks to their GDP growth forecasts are “substantial”, with “significant uncertainty” surrounding domestic and international economic developments. It has modelled scenarios for increased tariffs between the US and rest of the world, finding the potential for large impacts on GDP.

The OBR estimates that the level of GDP will be 0.2% higher overall (not per year) because of government policies by 2029/30.

The OBR also forecasts that living standards will rise modestly on average in coming years.

Public finances

The Chancellor introduced new fiscal rules in the 2024 Autumn Budget, and the OBR has assessed the economy against these rules before and after the policy actions taken in the Spring Statement.

Current budget rule

The first rule says that the current budget must be in surplus in 2029/30.

The government is forecast to meet this target by a margin of 0.3% of GDP (£9.9 billion) in 2029/30. The margin remains relatively low compared with those of previous Chancellors.

The OBR says the probability of this target being met is 54%.

If the Chancellor hadn’t taken policy action in the Spring Statement, the current budget rule would have been missed in the March 2025 forecast. The key policies lowering the current budget in 2029/30 include welfare spending reductions (compared with previous plans), departmental day-to-day spending reductions (compared with previous plans) and additional revenue from reducing tax avoidance.

Public sector net financial liabilities rule

The second fiscal rule says that public sector net financial liabilities (PSNFL), expressed as a percentage of GDP, should be falling in 2029/30, compared with the previous year.

The government is forecast to meet this target by a margin of 0.4% of GDP (£15.1 billion) in 2029/30.

The OBR says the probability of this target being met is 51%.

Policy announcements

Spending decisions announced since the 2024 Autumn Budget, including those in the 2025 Spring Statement, will result in increases in spending in the short term, but decreases later.

As the charts below show, the Chancellor has adjusted departmental budgets since the 2024 Autumn Budget. In general, she has reduced day-to-day (resource) spending in the later years of the forecast, but increased investment (capital) spending.

Most of the change in budgeted spending in the Spring Statement is policy-driven, particularly reflecting the planned increase in defence spending funded by cutting overseas aid, as announced by the Prime Minister in February and discussed in the Library’s Insight UK to spend 2.5% of gross domestic product on defence by 2027.

Because aid spending tends to be weighted more towards day-to-day spending than defence, moving this money from the aid budget to the defence budget results in day-to-day spending being lower and investment spending being higher than before.

The Chancellor also announced:

• Further information about changes to benefits, beyond that set out in the Pathways to Work green paper, published on 18 March 2025 – the whole package of welfare measures decreases planned government spending by around £4.8 billion in 2029/30.
• A Transformation Fund of £3.25 billion fund over 2025/26 to 2027/28, to “support fundamental reform of public services”.
• A range of measures to recover more tax.