Spring Statement 2025: What It Means for You and the UK Economy

Spring Statement 2025: What It Means for You and the UK Economy - Zomi Wealth
Chancellor Rachel Reeves delivered her much-anticipated Spring Statement 2025 in the House of Commons this week, outlining the government’s latest plans for economic growth, public spending, and welfare reform. Backed by updated forecasts from the Office for Budget Responsibility (OBR), the statement included a mix of changes that will affect households, businesses, and investors alike.
Here’s a breakdown of the key points, and what they could mean for you.

Welfare and Benefits: A Tighter System

Several significant changes are being introduced to Universal Credit and disability benefits, designed to tighten eligibility and reduce spending:
• Health-related Universal Credit payments for new claimants will be cut from £97 to £50/week in 2026 and frozen until 2030.
• Under-22s will no longer be eligible for the health-related element of Universal Credit.
• A new top-up payment will be introduced for claimants with the most severe conditions.
• Personal Independence Payment (PIP) eligibility will become stricter from November 2026.
• The standard Universal Credit allowance will rise by £14/week by 2030 (down from £15 as previously planned).
These changes are likely to impact younger claimants and those with less severe health conditions the most. They mark a move towards targeted welfare support but may also increase financial strain for vulnerable groups.

Economic Forecasts: Slower Now, Better Later

The OBR downgraded growth for 2025 to 1% (from 2%), reflecting economic headwinds and lingering inflation. However, the outlook is more optimistic for the years ahead:
• 2026: 1.9%
• 2027: 1.8%
• 2028: 1.7%
• 2029: 1.8%
Despite near-term challenges, the OBR now expects the UK economy to be larger by 2029 than it forecast last October.
Inflation is expected to average 3.2% in 2025, but should fall to 2.1% in 2026, reaching the 2% target in 2027. While higher than initially forecast, the inflation trajectory is encouraging for interest rate watchers and mortgage holders.

Housing and Construction: Boosting Supply

In a bid to address the UK’s housing shortage, the government is leaning on planning reform and skills investment:
• Planning changes are expected to add 170,000 new homes over five years.
• A new £625m investment will go towards training construction workers across England.
While modest in scale, this could help ease pressure in the housing market over time, with knock-on benefits for affordability and economic output.

Public Spending: Trimming the Fat

With debt servicing costs rising, the Chancellor announced measures to keep spending rules on track:
• Day-to-day government spending will be cut by £6.1bn per year by 2030.
• 10,000 civil service jobs will go—mainly in HR, policy, and comms.
• A 15% cut in departmental administrative costs is targeted by 2030.
The goal? To rebuild a £9.9bn fiscal buffer and meet the government’s spending and debt rules. The OBR now estimates a 54% chance of hitting the spending rule (up from 51%).

Defence and Aid: Prioritising Security

Defence spending will increase significantly:
• A further £2.2bn in 2026, on top of the planned £2.9bn rise.
• This brings military spending to 2.36% of national income, edging closer to the 2.5% target by 2027.
To help fund this, the government will cut overseas aid from 0.5% to 0.3% of gross national income in 2027—a controversial move likely to attract criticism.

Tax and Compliance: Cracking Down on Avoidance

A few other measures caught the eye:
• 400 new HMRC staff will be hired to focus on wealthy individuals using offshore tax avoidance.
• A new US-style “whistleblower” scheme will reward informants with a portion of tax recovered—expected to raise £500m over five years.

In Summary: A Balancing Act

Rachel Reeves’ first Spring Statement as Chancellor strikes a pragmatic tone, aiming to balance fiscal responsibility with targeted investment and welfare reform.

The message is clear: the government is preparing for a slower-growth environment in the short term, while making structural changes to improve long-term stability.

What Should You Do Now?

If you’re concerned about how the changes could affect you—especially in areas like benefits, housing, or investment strategy—it’s a good time to:
• Review your financial plan
• Speak with a financial adviser about how policy changes could impact your income or entitlements
• Keep an eye on inflation and interest rate announcements in the coming months As always, planning ahead is the best way to stay resilient in uncertain times.

Sources:

https://www.lbc.co.uk/news/explained/spring-budget-2025-summary-what-rachel-reeves-announced-in-todays-speech/
https://www.bbc.com/news/articles/c9qjn879lr4o
https://news.sky.com/story/spring-statement-2025-key-takeaways-13336004
https://www.reuters.com/world/uk/uk-spring-statement-updates-rachel-reeves-set-out-latest-forecasts-2025-03-26/
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