Chancellor Rachel Reeves this week delivered her second major financial statement as she provided an update on public finances, backed by the latest forecasts from the Office for Budget Responsibility.
The statement did not contain any further tax increases as the Chancellor pledged to stick to her two fiscal rules: the first, to balance the budget, and the second, to have net financial debt fall by the end of the forecast period to 2029/30.
However, both the Bank of England and the Office for Budget Responsibility (OBR) have halved their UK growth predictions following October’s Budget.
Here, we round up the key economic announcements from the Chancellor.
Inflation and the economy.
Reeves’ update on the economy comes after the UK inflation rate fell to 2.8% in the 12 months to February. It remains above the Bank of England’s target of 2%.
She says the OBR now forecasts inflation will average 3.2% this year – back in October’s Budget, inflation was forecast to be 2.6%.
In 2026, inflation is forecast to drop to 2.1% – just above the Bank of England’s target, but below the 2.3% inflation rate last forecast. The 2% target is predicted to be reached by 2027.
Net financial debt is forecasted to be 82.9% of GDP in 2025-26 and 83.5% in 2026-27, before falling to 82.7% in 2029-30, providing headroom of £15.1 billion in the final year of the forecast.1
Growth forecast halved.
The OBR revised down the UK’s growth forecast for 2025 from 2% in the autumn to 1% – a number Reeves says she’s “not satisfied with”. Longer-term growth estimates have been upgraded, however, with GDP growth of 1.9% expected in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.1
Welfare cuts.
The Office for Budget Responsibility has assessed that changes to benefits will save £3.4 billion in 2029/30 rather than the £5 billion as planned.
The Chancellor announced further welfare cuts including changes to disability and sickness benefits, along with new changes to universal credit incapacity benefits.
The majority of cuts announced in the Statement will be offset by billions of pounds in long-term investment to grow the economy, with a particular focus on supporting higher spending on defence and the building of millions of new homes.
Defence spending.
The government will spend 2.5% of GDP on defence by 2027, which will be achieved by reducing overseas aid spending to 0.3% of gross national income. 1
The Chancellor confirmed a £2.2 billion funding boost for the Ministry of Defence from next year. 1
Planning reforms.
Reeves says the OBR is also calculating that the planning reforms will allow 1.3 million over the next five years, with the government target of building 1.5 million over their parliamentary term. 1
No tax rises.
While the speech included no tax changes, and confirmed there would be no further tax increases, Reeves revealed investment will continue in cutting-edge technology to crack down on tax avoidance.
Her previous Budget raised a record £40 billion of taxes and also included some key announcements to come into force next week, including:
National Insurance increase.
National Insurance contributions are paid by employers and employees. Employers currently pay National Insurance of 13.8% on a worker’s earnings above £9,100 per year. The rate of employer National Insurance contributions is increasing from 13.8% to 15% from April 2025. Employers will start paying this rate of National Insurance on earnings above £5,000 per year, instead of the current £9,100 per year.
A rise in stamp duty.
First-time buyers: From April, the value at which you’ll need to start paying Stamp Duty will decrease from the current value of £425,000 to properties over £300,000.
Not a first-time buyer: The £250,000 limit will revert to include properties over £125,000. Buyers will then have to pay 2% on the portion between £125,001 and £250,000 and 5% on anything between £250,001 and £925,000.
Living Wage and Minimum Wage to increase.
The National Living Wage for over-21s will increase from £11.44 to £12.21 per hour, from April 2025. This 6.7% increase is worth £1,400 a year for an eligible full-time worker.
The Government will also move towards a single-adult rate over time. The National Minimum Wage for 18 to 20-year-olds will rise from £8.60 to £10.00 per hour, an increase of 16.3% – the largest increase in the rate on record.
Tax is subject to an individual’s personal circumstances and tax rules can change at any time.
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1 Chancellor figures and statement taken from:
https://www.gov.uk/government/speeches/spring-statement-2025-speech
