Chancellor Rachel Reeves certainly delivered a no-frills Spring Statement this year! No tax changes, no big surprises, but there were a handful of concerns about the economy. With the UK’s growth forecast slashed from 2% to just 1% for 2025, the focus was on balancing the books and navigating a world full of uncertainty.
So, what were the key points of the Spring Statement 2025? Let’s take a look.
Why has growth been slashed in half?
The Office for Budget Responsibility (OBR) halved the UK’s growth forecast to 1% for 2025. But it’s not just the UK, every G7 economy is feeling the squeeze. Global instability, rising borrowing costs, and unpredictable trade patterns are making it harder for economies to thrive. Reeves pointed out that the world has changed since Labour took office, and the UK has to adapt to this new, unpredictable landscape.
There’s a little light at the end of the tunnel though as growth is expected to bounce back to 1.9% in 2026 and hover around that mark for the next few years. But for now, it’s a bit of a slow climb.
Fiscal headroom restored
Reeves managed to restore £9.9bn of fiscal headroom after the Autumn Statement, which means the government now has some wiggle room. But this didn’t happen magically — cuts to welfare, reduced departmental spending, and planning reforms played a huge role in making this happen.
Without these actions, the budget would have been £4.1bn in the red by 2029/30. Instead, Reeves is two years ahead of her stability rule, giving the government breathing space to weather any future storms. It has caused some frustration with where the cuts are coming from though.
Inflation is falling, but we’re not out of the woods yet
The good news is that inflation fell to 2.8% in February, and the OBR predicts it’ll average 3.2% this year before dropping to 2.1% by 2026. The Bank of England’s 2% target should be met by 2027.
The bad news is that interest rates are still stuck at 4.5%, making borrowing expensive and putting pressure on businesses and homeowners alike. Lower inflation is nice, but high interest rates are still keeping growth on a tight lead.
Tax evasion crackdown
Even though Reeves didn’t announce any tax hikes, she’s not letting tax evasion slide. The government is investing heavily in HMRC’s technology and capacity to crack down on those dodging taxes. This move is expected to raise £1bn in additional revenue.
There’s also some welcome news for parents: from Summer 2025, employed parents can pay the High-Income Child Benefit Charge (HICBC) through PAYE, eliminating the need for Self-Assessment. One less hassle for busy families!
Defence spending up, welfare spending down
Defence spending is getting a lift, with plans to increase it to 2.5% of GDP by April 2027. This will fund investments in AI, drones, and defence innovation to strengthen national security.
But this money is coming from cuts elsewhere — overseas aid is dropping to 0.3% of GDP by 2029/30, and the welfare budget is taking a £3.4bn hit.
That said, pensions are safe for now. The state pension and pension credit will rise by 4.1% in April 2025, keeping the triple lock promise intact.
Frozen tax thresholds
Even though Reeves didn’t announce new taxes, the frozen tax thresholds continue to bite. With income tax and inheritance tax thresholds frozen until 2028 and 2030, respectively, the tax burden is sitting at a 70-year high of 37.7% of GDP.
Employers will also feel the heat, with the National Insurance Contribution (NIC) rate rising by 1.2% to 15% from April 2025. And if you’re planning to buy property, keep in mind that Stamp Duty Land Tax cuts end on 31 March 2025.
Autumn Budget
The Spring Statement didn’t bring any headline-grabbing tax changes, but the Autumn Budget is where the real action could happen. Reeves has promised to stick to one fiscal event per year to provide stability, but given how quickly things change, that promise may be tough to keep.
Come autumn, we could see:
- Frozen thresholds extended beyond 2028 and 2030
- New taxes, similar to the health and social care levy introduced by Rishi Sunak
- A potential break in manifesto pledges if public finances deteriorate further
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