Rachel Reeves has blamed a global economy that "has become more uncertain" for the fact that the 2025 growth estimate for the UK has been halved to 1% from 2%.
In a Spring Statement "that was a bit boring", according to Sky News' economic correspondent Rob Powell, "as most of the policy changes" had been "extensively punted out beforehand", the chancellor confirmed she has been forced to make an additional £14 billion of savings to hit her borrowing rules.
"The closest we got to the fabled 'rabbit from the hat'," said Powell, was news that the Office for Budget Responsibility (OBR) had upgraded growth forecasts from 2026-2029 – "driven in part by the impact of planning reforms". But Reeves also confirmed further cuts to benefits and welfare, with the Government's own impact assessment finding the cuts would drive 250,000 more people, including 50,000 children, into poverty.
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"Apart from a bit extra being squeezed from welfare changes, there was no unexpected extra pain," said Sky News. But "there wasn't much pleasure either", as the OBR halving its growth forecast is a huge blow to Reeves and Keir Starmer, who say growth is their "number-one priority". Critics are "pointing the finger" at October's tax hike, said The Telegraph, as well as Reeves' decision to increase National Insurance on businesses from April.
But the chancellor offered a "full-throated" defence of these changes, said the paper's political editor Ben Riley-Smith. Reeves said: "Ours were the right choices. The right choices for stability and the right choices for renewal, funded by the decisions that we took on tax."
"In other words, Reeves has doubled down on her tax raid. No 'reset' here", said Riley-Smith.
In one sense though, the chancellor "scored a victory", said the BBC's deputy economics editor Dharshini David, as the OBR also said Reeves had restored the government's headroom – "which gives the chancellor leeway to cut taxes or increase spending in the future" – by setting out cuts and reforms in today's statement.
But in slightly less good news, the budget watchdog informed Reeves that her controversial cuts to benefits and welfare, revealed last week, would not save £5 billion by 2030 as she had anticipated. After "intensive negotiations", said The Times, the OBR "rejected" the Treasury's estimate and concluded that ministers "overstated the savings by £1.6 billion". To help "balance the books", Reeves was forced to announce further cuts, to save £500 million by 2030.
These cuts are already provoking a "rebellion" among MPs, said The Independent. They were reportedly "not pre-briefed on the plans", and are becoming "increasingly frustrated and concerned". One senior backbencher dubbed the situation a "shitshow".
What next?
Looming over the Spring Statement though are Donald Trump's tariffs, with the OBR warning that the US president's threats to impose new reciprocal tariff rates next week on countries around the world could cut growth in the UK economy by up to 1%. This would more or less wipe out the surplus the government is predicted to have by 2029-30, reducing it "to almost zero".
In better news for the chancellor, inflation fell more than expected in February, to 2.8% (compared with 3% in January), according to the Office for National Statistics this morning. Economists had expected it to drop to 2.9%, or stick at 3%. But even that's a "bit of a red herring", Paul Dales, chief UK economist at Capital Economics, told The Times.
The Bank of England has forecast that inflation will rise again thanks to rising energy and utility prices, potentially hitting 3.75% in September. "Make no mistake," said Sanjay Raja, chief UK economist at Deutsche Bank: "inflation remains on a one-way journey: up."
