What To Expect From Rachel Reeves’ Spring Statement

The UK’s growth has been sluggish in the half-year since the latest Autumn Budget, and Rachel Reeves is likely to announce spending cuts during her Spring Statement this 26th of March.

These cuts should help the government balance out the deficit in the Budget brought on by the lack of growth, but have the potential to hinder public services and those who rely on them.

British GDP had a strong start last year, rebounding from the brief recession at the end of 2023, with inflation coming back down to earth and a broadly positive outlook for businesses. However, growth has slowed since then, coming to a halt in Q3 before picking up slightly in the last quarter of 2024, right after the latest Budget from the Labour government.

The trend continued in the first few months of this year, with the Bank of England halving its growth forecast for the year ahead. In February it said it expects the economy to grow by 0.75% during 2025, down from its previous estimate of 1.5%.

This puts Chancellor Reeves in a tight spot, having already raised taxes—especially on businesses—in her last fiscal event, and while Tories blame such tax hikes for the lack of growth the Labour party blames adverse the global economic outlook and political tensions (Ukraine’s war, Trump’s tariffs, Europe’s Rearmament…)

Most reports agree that Reeves’ only way out of the budget deficit is a flurry of spending cuts expected to be announced during the Spring Statement on March 26th. The OBR’s report is also likely to cut its forecasts for economic growth in the upcoming years similar to the Bank of England’s projections.

Sources say these may be the harshest public spending cuts since 2010’s austerity, and although the Chancellor has ruled out any further tax hikes, there have been rumours of a further extension of Income Tax Thresholds for 2 additional years, until 2030.

This is considered a “stealth tax”, as thresholds should theoretically increase with inflation to keep taxes constant over time in real terms. Instead, because salaries have risen and will continue rising, while tax thresholds remain the same, the total fiscal burden on UK taxpayers keeps growing.

Previous reports had speculated that Reeves would review the Cash ISA system, potentially decreasing the tax-free allowance from £20,000 to £4,000. However, the Chancellor has since ruled out such a possibility.

Based on the information available so far, the main concern for the upcoming Spring Statement seems to be around spending cuts, which many fear will harm public services, as well as the poorer and more vulnerable demographic who rely on them. The announcements will come only a week after Work and Pensions Secretary Liz Kendall unveiled welfare cuts worth up to £5bn.