Chancellor Rachel Reeves delivered the government’s first Spring Statement yesterday afternoon, promising stability and investment in a global political climate of increasing uncertainty.
She prefaced her announcements with a defiant statement saying her fiscal rules were “non-negotiable” in order to bring necessary stability and security to the UK.
“Driving growth in our economy”
Reeves began by breaking down the Statement into two rules: stability, to ensure public spending is under control, and investment, to drive growth in the economy.
Through her non-negotiables she promised a move away from the deficit Reeves has said was left by the Tory government, to a surplus of £9.9bn by the end of this Parliament.
However, she was forced to admit that the OBR had slashed predicted growth for the UK economy from 2% to 1% for this year, drawing echoing jeers and criticism from the opposition.
The chancellor made clear that the government would not be increasing taxes for “working people”, but vowed to crack down on tax evasion using innovative technology.
Reeves said: “When working people are paying their taxes, while still struggling with the cost-of-living, it cannot be right that others are still evading what they rightly owe in tax.”
Reeves promised to raise £1bn on top of £6.5bn promised in the Autumn Budget, through charges to tax fraudsters.
‘A defence-industrial superpower’
There was a strong focus on defence spending for this budget, following months of ever-growing political instability in Ukraine and the Middle East, and uncertainty between the US and their traditional allies.
Defence spending will increase by 2.5% of GDP, providing the Ministry of Defence with an extra £2.2bn.
There was a push for defence innovation, with minimum 10% of the MoD’s equipment budget dedicated to technology like drones and AI, boosting manufacturing production across Derby, Glasgow and Newport, and £400m protected for various other defence innovation techniques.
Naval bases across the country will receive funding and support, with £200m promised to support nuclear submarine jobs in Barrow, and funds for military homes and naval ports in Plymouth and Portsmouth.
This spending will be funded by reducing overseas aid from 0.5% to 0.3% of gross national income in 2027, and from the Treasury’s reserves.
“Biggest shake up to welfare system in a generation“
Last week’s announcement by the Department for Work and Pensions on welfare cuts received widespread criticism, from both left and right, from the opposition and even from Labour’s backbenchers, narrowly avoiding a rebellion.
Yesterday’s statement saw Reeves double down on this, outlining reform to health-related universal credit for new claimants, which will now not rise with inflation until after 2030, following the announced cuts from £97 to £50 per week from next year.
Eligibility for personal independence payments (Pips) will be much stricter from November 2026, as the DWP have since announced 3.2m families will be affected by this.
However, Reeves promised £1bn for employment support services to help people back into work, and £400m for job centres, declaring the Labour Party as “the party of work”.
“Within touching distance“
Reeves delivered a more optimistic announcement on housing, promising thousands of new social and affordable housing with a £2bn grant.
The chancellor announced 18,000 new homes would be built, and will oversee 1.3m new homes being built in the next five years, describing the pledge as “within touching distance” of their manifesto of 1.5m homes, but still falling short of 200,000.
“She is the architect of her own misfortune”
Unsurprisingly, the opposition were scathing of the government’s fiscal plans.
Shadow chancellor Mel Stride blamed Reeves’ budget cuts for halving the growth rate, calling her bluff on the “£22bn black hole” as a “smoke screen”, and one that the chancellor created rather than invented.
Stride accused Reeves of gambling with “fiddle fiscal targets”.
Stride said: “She rolled the dice on a wafer thin margin and she lost, reckless with her own costs.”
“Anger at Labour’s warfare state”
Deputy Prime Minister and MP for Ashton-Under-Lyne defended Reeves’ welfare reforms, drawing attention to the £1bn support for “opportunities to get back into work.”
She stated: “It’s a very working-class thing that people do want to be able to provide for their families and themselves, they don’t want handouts, they want support, and that’s the important element of welfare reform.”
However, papers and pundits across the political spectrum have been critical of what is proving to be an unpopular first Spring Statement, with many front pages highlighting potentially devastating numbers, including 250,000 pushed into poverty.
Main image: Chancellor Rachel Reeves leaves No 11 Downing Street to deliver her Spring Statement. Picture by Lauren Hurley / 10 Downing Street via Flickr
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