26 Mar 2025

Reeves Unveils Economic Outlook and Welfare Shake-Up in Spring Statement

Written by  Shani Brooks

Chancellor Rachel Reeves has outlined the government’s new economic direction in the House of Commons as the Office for Budget Responsibility (OBR) released its updated forecasts. The latest figures show weaker-than-expected growth of just 1% for 2025, revised down from 2%. However, projections for the following years have improved slightly, with growth expected to hover around 1.7 - 1.9% through to 2029. Inflation is set to average 3.2% this year before easing to the Bank of England’s 2% target by 2027.

A major overhaul of welfare has also been confirmed. From April 2026, incapacity benefits under Universal Credit will be halved for new claimants, with a freeze in cash terms for existing recipients set at £97 per week. A top-up for the most severely affected will remain, but those under 22 will no longer qualify for this additional support. These changes aim to reduce long-term welfare spending but have faced criticism over their impact on vulnerable groups.

On defence, spending will increase by a further £2.2bn next year, bringing military expenditure to 2.36% of national income. To fund this, the government will reduce the overseas aid budget from 0.5% to 0.3% of gross national income in 2027 and utilise Treasury reserves.

Meanwhile, plans are in place to cut administrative costs across government departments by 15% by the end of the decade. This will include the loss of around 10,000 civil service roles in areas such as HR, policy, communications, and office management.

We use cookies to provide you with the best possible browsing experience on our website. You can find out more below.
Cookies are small text files that can be used by websites to make a user's experience more efficient. The law states that we can store cookies on your device if they are strictly necessary for the operation of this site. For all other types of cookies we need your permission. This site uses different types of cookies. Some cookies are placed by third party services that appear on our pages.
+Necessary
Necessary cookies help make a website usable by enabling basic functions like page navigation and access to secure areas of the website. The website cannot function properly without these cookies.
ResolutionUsed to ensure the correct version of the site is displayed to your device.
essential
SessionUsed to track your user session on our website.
essential
+Statistics
Statistic cookies help website owners to understand how visitors interact with websites by collecting and reporting information anonymously.
Google AnalyticsGoogle Analytics is an analytics tool to measure website, app, digital and offline data to gain user insights.
Yes
No

More Details