Chancellor Rachel Reeves confirmed there will be no further tax increases in the 2025 Spring Statement, sticking to her pledge of one fiscal event per year. While the Autumn Budget introduced a record £40 billion in tax hikes, it did not raise Income Tax, employee National Insurance, or VAT.
Instead of tax changes, the Chancellor focused on spending plans and economic forecasts. The Office for Budget Responsibility (OBR) revised its 2025 UK growth forecast down from 2% to 1%, but Reeves noted that the OECD has downgraded growth forecasts for every G7 economy. The OBR also predicts that inflation will average 3.2% this year before falling to the Bank of England’s 2% target by 2027.
Key Announcements
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Defense Spending Boost: The government will increase defense spending to 2.5% of GDP by cutting overseas aid, adding £2.2 billion to the Ministry of Defense in the next financial year to address global instability.
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Investment in Defense Innovation: At least 10% of the MoD’s equipment budget will be allocated to advanced technology, boosting production in Derby, Glasgow, and Newport.
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Housing and Growth: Planning reforms will bring the UK closer to its target of 1.5 million new homes this Parliament, with the OBR estimating a 0.2% GDP increase by 2029/30, adding £6.8 billion to the economy.
Chancellor’s Statement
Reeves emphasised the shifting global landscape, citing rising economic uncertainty and geopolitical instability:
“Our task is to secure Britain’s future in a world that is changing before our eyes. The threat facing our continent was transformed when Putin invaded Ukraine. It has since escalated further and continues to evolve rapidly. At the same time, the global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable and borrowing costs rise for many major economies.”
