Four key takeaways from Rachel Reeves’ Spring Statement – from welfare to defence
Rachel Reeves has delivered her spring statement in the House of Commons, as she tries to settle nerves against a tricky economic backdrop.
The event was originally intended to be a simple forecast for how the measures revealed in the Chancellor’s budget last October are panning out.
But shifting geopolitical forces, plus unease from businesses and a lack of headroom following that budget, mean today’s announcement will carry more weight.
In her statement, Reeves has presented analysis from the Office for Budget Responsibility (OBR), the public body funded by the UK Treasury that provides independent economic forecasts and independent analysis of the public finance. It sets out how her measures are expected to impact the British economy.
Over the past few weeks, she and the Treasury have been going back and forth with the OBR to figure out what tweaks might need to be made to get their forecast in the best possible state.
It’s these tweaks that are being presented alongside the latest OBR predictions today.
‘Final adjustments’ to welfare cuts announced
After the cuts to disability benefit changes announced by Liz Kendall last week, Reeves confirmed how much Universal credit payments will change by.
In order to find £500 million extra, the Universal Credit standard allowance will increase to £106 by the end of the decade. Before today, it was due to rise to £107.
The health element of the benefit will also be frozen after being cut by 50% – the previously announced reforms would have seen them rise by inflation after being halved.
Reeves added Labour is ‘investing £1bn to provide guaranteed, personalised employment support to help people back into work’.
Tens of thousands more children in poverty
At the same time the OBR assessment of the Chancellor’s measures was released, the Department for Work and Pensions published its impact assessment of cuts to welfare.
This included the effects of the latest changes outlined above.
At the heart of it was a pair of numbers certain to draw a lot of attention: the measures would put an additional 250,000 people in relative poverty, including 50,000 children.
However, the DWP pointed out this number does not take into account the impact of £1 billion funding to get disabled and those with long-term health conditions back into work.
The funding was expected to ‘mitigate the poverty impact among people it supports into work’, the assessment says.
'I can't afford to keep my heating on'
David Wilson, 46, from Norfolk, who has degenerative bone disease on his hips, said he is ‘terrified’ of his disability benefits being cut.
The tumours on his hips cause him ‘pain every day’ and he uses crutches to get around, he told Metro.
Cold weather worsens his symptoms and mobility, but David can only afford to keep his heating on when his six-year-old son visits at his rural home.
David, who had a career in financial services, stopped working in 2022 and has received Universal Credit and Personal Independence Payment (Pip) since.
He said he has cut ‘pretty much everything’ in his life to afford food and enough oil for his son’s visits.
‘I don’t use my heating at all and haven’t done so for many months. I have my son during weekends. I can’t afford £350 to get 500 litres of heating oil, what little I have I’ll keep it for when my son visits,’ he explained.
While he doesn’t know yet exactly how much his benefits will be cut, he fears he could ‘probably lose £300-£400 per month.’
‘I can’t speculate too much, the idea is too frightening.
‘I don’t know what will happen. I will end up being more of a burden on the welfare system by having to get emergency accommodation because I can no longer afford my rent,’ he said.
He has used Trussell Trust and other foodbanks, but he said they don’t have capacity to provide people with fresh produce and proteins.
‘There’s potential that this generation will be malnourished,’ he warned.
Commenting on the spring statement, he said: ‘I felt the hypocrisy of the statement was disgusting. The Chancellor said if we don’t make these cuts we will be writing off a generation, while they will be putting multiple generations into poverty and destitution with a sweeping hand.
‘To attack the disabled people and those who are already suffering poverty, it beggars belief.’
The planned benefit cuts have also scared the UK’s LGBTQ+ disabled community, who are already closest to falling into poverty.
Josh Shani, from London, who has brittle bone disease, told Metro the cuts will ‘push more people into poverty,’ adding that ‘people wouldn’t expect a Labour government to do this.’
‘They are going to kill disabled people,’ she said.
Food banks said they are ‘extremely worried’ over the planned cuts to disability benefits.
Trussell Trust foodbank’s head of policy Sumi Rabindrakumar told Metro the charity is ‘extremely worried because we know disabled people are three times more likely to face hunger.’
‘When you look at that reality of people on precarious incomes the idea of making record cuts is really a brutal prospect,’ she said.
She accused the planned cuts for not being ‘really about pushing people to work, they are about making immediate savings.’
Three-quarters of people referred to Trussell Trust have a disability or are living with someone with a disability, she said, adding that ‘there is already a high risk of hunger facing people with disability.’
Extra £2.2 billion of funding for the Ministry of Defence
Reeves has announced there will be extra cash given to defence for things such as drones.
She said the spend isn’t just about boosting ‘our national security,’ but also our economic security.
Reeves told the House of Commons: ‘Today I confirm that I will provide an additional £2.2bn for the Ministry of Defence next year a further downpayment on our plans to deliver 2.5% of GDP.
‘This additional investment is not just about increasing our national security but increasing our economic security, too. As defence spending rises, I want the whole country to feel the benefits.
‘So I will set out the immediate steps that we are taking to boost Britain’s defence industry and to make the UK a defence industrial superpower.
‘We will spend a minimum of 10% of the Ministry of Defence’s equipment budget on novel technologies including drones and AI enabled technology driving forward advanced manufacturing production in places like Glasgow, Derby and Newport creating demand for highly skilled engineers and scientists and delivering new business opportunities for UK tech firms and start-ups.’
House building will hit a 40-year high
Building homes in the UK will hit the highest levels for more than 40 years, Reeves has said.
She told the House of Commons: ‘The OBR have concluded that our reforms will lead to housebuilding reaching a forty year high of 305,000 by the end of the forecast period.
‘Changes to the National Planning Policy Framework alone will help build over 1.3 million homes in the UK over the next five years taking us within touching distance of delivering on our manifesto promise to build 1.5 million homes in England this parliament.’
No tax rises – instead a tax evasion crackdown
Reeves has said she isn’t planning to increase taxes to tackle the economy’s woes, instead she’s planning to crackdown on tax dodgers.
She told MPs: ‘As I promised in the autumn, this Statement does not contain any further tax increases. But 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.’
She added: ‘Today I go further, continuing our investments in cutting edge technology, investing in the HMRC capacity to crack down on tax avoidance and setting out plans to increase the number of tax fraudsters charged every year by 20%.’
What are the government’s fiscal rules?
The government’s fiscal rules would more accurately be called targets, but ‘rules’ makes them sound more definitive.
There are two main ones: firstly, the government wants to bring in as much or more money (through taxes and other sources) than it spends day-to-day.
This would mean its budget would be in surplus, and any borrowing would be for investment spending which should ultimately get the money back.
Secondly, the government wants its net financial debt (defined as public sector net financial liabilities) to be falling relative to the size of the economy compared to the previous year.
The Chancellor is aiming to achieve both of these goals by the 2029/30 financial year, and today the OBR has revealed how that’s going – as well as its forecasts for the UK’s economic growth.
In order to avoid breaking those fiscal rules, Reeves is trying to find ways of boosting the government’s finances without too much borrowing or raising taxes.
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