What Are We Going to Get in the Coming Spring Statement?

On March 26, 2025, Chancellor Rachel Reeves will step up to the dispatch box in Parliament to deliver her Spring Statement. Though it’s not the full-blown Budget, the event is more than just a routine update.

This is her moment to take stock of the economy, respond to pressing headwinds and shape the government’s message for the months ahead. But as economic growth buckles and a storm of global uncertainty brews on the horizon, Reeves has a tough balancing act ahead.

What’s the Spring Statement About?

The Spring Statement is at its core a health check on the UK economy. It’s delivered alongside the Office for Budget Responsibility (OBR)’s latest economic forecast, which provides a snapshot of how the country is performing. The OBR examines the government’s spending plans, and checks if it’s sticking to its own rules and their resulting hit on households and businesses.

This year, the OBR’s findings are expected to make for a grim reading. The UK’s economic growth has been lacklustre: GDP crawled up just 0.1% in the final quarter of 2024. Inflation, though lower than its peak, stubbornly refuses to budge below the Bank of England’s 2% target. And with global events like rising trade tensions with the US, the economic outlook is not that rosy.

Reeves will present the OBR’s report to Parliament and map out her response. But don’t expect a fireworks display of new policies. The chancellor has made it clear the Spring Statement isn’t the place for big announcements. Rather, it’s about laying the groundwork for the Budget later in the year and giving families and businesses some much-needed stability.

Tough Choices Ahead

That said, stability doesn’t mean doing nothing. Reeves is under tremendous pressure to make some hard decisions, particularly when it comes to spending. The Treasury has already drafted plans for billions of pounds in cuts; welfare spending will likely bear the biggest brunt. The government has been worried about the surging number of benefit claimants. Reeves has previously promised “fundamental” reforms to the welfare system.

But it’s not just welfare in the firing line. Other government departments could also see their budgets slashed. This comes as the chancellor’s financial buffer -- a £9.9 billion cushion to meet her budget rules -- has reportedly been wiped out. Reeves has two workarounds: not borrowing to fund day-to-day spending and taking measures to push down debt as a share of national income by the end of this Parliament. Sticking to those rules won’t be easy, though, with borrowing costs higher than they were a year ago.

The Stealth Tax Conundrum

One of the biggest questions hanging over the Spring Statement is whether Reeves will extend the freeze on Income Tax thresholds. This policy, dubbed a “stealth tax,” drags more people into higher tax brackets as their wages wax, even though the tax rates themselves don’t change. The previous government froze thresholds until April 2028. But Reeves could choose to prolong it further, thereby raising an estimated £7 billion a year.

It’s a controversial move, however. In her first Budget, Reeves argued that protracting the freeze would “hurt working people” by snatching more money from their pay checks. But with the government’s coffers under strain, she may reckon her hands are tied.

Global Headwinds & Household Squeezes

The UK’s economic troubles aren’t just homegrown. Global factors are playing a formidable part, too. Rising trade tensions, particularly between the US and China, could indirectly hit the UK by slowing global growth and yanking up inflation. Reeves has warned a trade war would be terrible for the economy, even if tariffs aren’t directly inflicted on the UK.

What is more, UK households are still feeling the pinch. Even though inflation has eased from its double-digit peak, prices are still racing ahead of wages in many sectors. And with National Insurance contributions primed to climb in April, businesses may pass on the higher costs to consumers, adding to the pressure on household budgets.

Conclusion

The Spring Statement is unlikely to be a big deal, though it will set the stage for the months ahead. Reeves will need to balance the need for fiscal discipline with the reality of a sputtering economy. Spending cuts and stealth taxes could be on the cards. But the chancellor will be keen to avoid alienating voters already being punished with the painful cost of living.

After Reeves delivers her statement, the opposition will have its say. Whether it’s Conservative leader Kemi Badenoch or shadow chancellor Mel Stride responding, expect sharp criticism of any cuts or tax measures. That means Reeves will need to convince the public -- and the markets -- that she has a credible plan to overcome the hindrances. In the meantime, households and businesses will be hoping for some clarity and reassurance. In uncertain times, a little stability can go a long way, after all.