Rachel Reeves has delivered her economic update – here are the main points, with political analysis

Reeves announces deep cuts to welfare and public services Analysis: Reeves does reasonable job of justifying fiscal prudence but welfare cuts cast shadow OBR halves 2025 growth forecast to 1%

Rachel Reeves says Labour was elected to “bring change to our country, provide security for working people and deliver a decade of national renewal”.

Reeves confirms huge cuts to the welfare budget, which the Office for Budget Responsibility (OBR) says amount to £4.8bn of savings for the Treasury. More than 3 million families will lose an average of £1,720 a year in real terms as a result of the cuts, according to government analysis, with an extra 250,000 people falling into relative poverty by 2029-30. As a result, the number of people living in relative poverty will rise to nearly 14.5m, including an extra 50,000 children.

“The Labour party is the party” of work, Reeves says. More than 1,000 people a day are qualifying for personal independence payments (Pip), Reeves says. “It is a waste of their potential and a waste of their futures.”

The basic rate of universal credit will rise by £14 a week by 2029-30, while the health element of universal credit will be frozen for existing claimants until 2029-30 and reduced to £50 for new claimants in 2026-27, before being frozen.

Pips will be reviewed. In the meantime, the government will introduce an additional eligibility requirement for the daily living element of the benefit.

There is £1bn for employment support to help people back into work, as well as £400m to support jobcentres.

The OBR estimates that her welfare cuts package will save £4.8bn by 2029-30, with welfare spending falling as a share of GDP from next year.

The OBR has halved its growth forecasts for 2025 from 2% to 1%.

But it has upgraded its growth forecast for next year and every year thereafter. It predicts GDP growth of 1.9% in 2026, 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029.

By the end of the forecast, the economy will be larger compared with the OBR’s forecast at the time of the budget, Reeves says.

Real household income will grow this year at twice the rate expected in autumn. Compared with the Conservatives’ final budget, the OBR says people will be more than £500 a year better off, even factoring in inflation.

Reeves says she will stick to her cast-iron “fiscal rules” and blames the Liz Truss mini-budget for pushing up borrowing rates and harming “ordinary working people” two years on.

The budget would have been in deficit by £4.1bn without the measures she is taking today, Reeves says, adding that she has restored the government’s headroom, to a surplus of £6bn in 2027-28, rising to £9.9bn in 2029-30, compared with the previous government’s £6.5bn.

Public sector net financial liabilities will be 83.5% of GDP in 2026-27, Reeves says, falling thereafter and coming down to 82.7% by 2030.

Inflation fell in February to 2.8% from 3% in January, Wednesday’s data showed. OBR forecasts show consumer price inflation will average 3.2% this year before falling “rapidly” and meeting the Bank of England’s 2% target from 2027 onwards.

The statement does not contain any further tax increases. But “it cannot be right that others are still evading what they rightly owe in tax”. Cutting-edge tech will help HMRC crack down on tax avoidance, which will raise a further £1bn, taking the total to £7.5bn.

Continue reading…Spring statement 2025, UK news, Rachel Reeves, Politics, Economics, Business, Economic growth (GDP), Welfare, Office for Budget Responsibility, Tax and spending, Economic policy, Budget deficit, Government borrowing, Inflation, Defence policy, Planning policyRead More

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