Spring Statement 2025 speech
Source: gov.uk (2025-03-26)

Spring Statement 2025 speech as delivered by Chancellor Rachel Reeves.

Mr Speaker, [political content redacted].

To provide security for working people.

And to deliver a decade of national renewal.

That work began in July – and I am proud of what we have delivered in just nine months.

Restoring stability to our public finances…

… giving the Bank of England the foundation to cut interest rates…

… three times since the General Election.

Rebuilding our public services…

… with record investment in our NHS…

… bringing waiting lists down for 5 months in a row.

And increasing the National Living Wage…

… to give 3 million people a pay rise from next week.

Now 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.

Mr Speaker, the job of a responsible government is not simply to watch this change.

This moment demands an active government.

A government not stepping back, but stepping up.

A government on the side of working people…

… helping Britain to reach its potential.

We have the strengths to do just that…

… as one of the world’s largest economies …

… an ally to trading partners across the globe…

… and a hub for global innovation.

These strengths…

… and the progress we have made so far…

… mean we can act quickly and decisively in a more uncertain world…

… to secure Britain’s future…

… and to deliver prosperity for working people.

Mr Speaker, as I set out at the Budget last year…

… I am today returning to the House to provide an update on our public finances…

… supported by a new forecast from the independent Office for Budget Responsibility…

… ahead of a full Spending Review in June.

I will then return to the House in the autumn to deliver a budget…

… in line with our commitment to deliver just one major fiscal event a year.

So let me turn now to the OBR’s forecasts…

… and I want to thank Richard Hughes and his team for their dedicated work.

The increased global uncertainty has had two consequences.

First, on our public finances.

And second, on our economy.

I will take each in turn.

In the autumn, I set out new fiscal rules that would guide this government.

These fiscal rules are non-negotiable.

They are the embodiment of this government’s unwavering commitment…

… to bring stability to our economy…

… and to ensure security for working people.

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But we must earn that trust every single day.

The two fiscal rules that I set out at the Budget were…

First, our “Stability Rule”, which ensures that public spending is under control…

… balancing the current budget by 2029-30…

… so that day-to-day spending is met by tax receipts.

Second, our “Investment Rule” to drive growth in the economy…

… ensuring that net financial debt falls by the end of the forecast period…

… while enabling us to invest alongside business.

Turning first to the Stability Rule, the OBR’s forecast shows that…

… before the steps that I will take in this statement…

… the current budget would have been in deficit by £4.1bn in 2029-30…

… having been in surplus by £9.9bn in the autumn…

… as the UK, alongside our international peers like France and Germany…

… has seen the cost of borrowing rise during this period of heightened uncertainty in global markets.

As a result of the steps that I am taking today…

… I can confirm that I have restored in full our headroom against the “stability rule”…

… moving from a deficit of £36.1bn in 2025-26 and £13.4bn in 2026-27…

… to a surplus of £6.0bn in 2027-28, £7.1bn in 2028-29 and a surplus of £9.9bn in 2029-30.

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That means that we are continuing to meet the Stability Rule two years early…

… building resilience to shocks in this, a more uncertain world.

The OBR forecast that the “investment rule” is also met two years early…

… with net financial debt of 82.9% of GDP in 2025-26 and 83.5% in 2026-27…

… before falling from 83.4% in 2027-28, to 83.2% in 2028-29 and 82.7% in 2029-30…

… providing headroom of £15.1bn in the final year of the forecast…

… broadly unchanged from the autumn.

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… debt interest payments now stands at £105.2bn this year…

… Mr Speaker, that is more than we allocate on Defence, the Home Office and Justice combined.

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So the responsible choice is to reduce our levels of debt and borrowing in the years ahead…

… so that we can spend more on the priorities of working people. And that is exactly what this government will do.

Mr Speaker.

I said that our fiscal rules were non-negotiable.

And I meant it.

I will always deliver economic stability.

And I will always put working people first.

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I said it at the Budget.

And I say it again today.

Let me now set out the steps the government has taken.

At the Budget we protected working people…

… by keeping our promise not to raise their rates of National Insurance, income tax or VAT.

At the same time, we began to rebuild our public services…

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Ours were the right choices, the right choices for stability and the right choices for renewal…

… funded by the decisions that we took on tax.

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 in tax.

In the Budget, I delivered the most ambitious package of measures that we have ever seen…

… to cut down on tax evasion…

… raising £6.5bn per year by the end of the forecast.

Today, I go further…

… continuing our investment in cutting-edge technology …

… investing in the HMRC’s capacity to crack down on tax avoidance…

… and setting out plans to increase the number of tax fraudsters charged every year by 20%.

These changes raise a further £1bn…

… taking the total revenue raised from reducing tax evasion under this [political content redacted] government to £7.5bn…

… figures verified by the Office for Budget Responsibility…

… and I want to thank my Honourable Friend the Exchequer Secretary for his continued work in this area.

Mr Speaker, last week my Right Honourable Friend the Secretary of State for Work and Pensions, set out this government’s plans to reform the welfare system.

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We believe that if you can work, you should work…

… but if you can’t work, you should be properly supported.

This government inherited a broken system.

More than 1,000 people are qualifying for Personal Independence Payments.

And 1 in 8 young people are not in employment, education or training.

If we do nothing, we are writing off an entire generation.

That cannot be right and we will not stand it.

It is a waste of their potential and it is a waste of their futures and we will change it.

As my Right Honourable Friend said in her statement last week…

… the final costings would be subject to the OBR’s assessment.

Today, the OBR have said…

… that they estimate the package will save £4.8bn in the welfare budget…

… reflecting their judgements on behavioural effects and wider factors.

This also reflects final adjustments to the overall package…

… consistent with the Secretary of State’s statement last week…

… and the government’s Pathways to Work Green Paper.

The Universal Credit Standard Allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30…

… while the Universal Credit Health element will be cut for new claimants by 50% and then frozen.

On top of this, we are investing £1bn to provide guaranteed, personalised employment support to help people back into work…

… and £400m to support the Department for Work and Pensions and our Job Centres to deliver these changes effectively and fairly…

… taking total savings after that for the package to £3.4bn.

Whilst spending on disability and sickness benefits will continue to raise, these plans

mean that welfare spending as a share of GDP will fall between 2026-27 and the end of the forecast period.

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We are reforming our welfare system…

… making it more sustainable…

… protecting the most vulnerable…

… and supporting more people back into secure work lifting them out of poverty.

Mr Speaker, at the Budget, I fixed the foundations of our economy to deliver on the promise of change.

That work has already begun.

2 million extra appointments in our NHS.

Waiting lists down.

New breakfast clubs opening across England.

The largest settlements in real terms for Scotland, Wales and Northern Ireland in the history of devolution.

Asylum costs, falling.

Promises made, promises kept.

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At the Budget…

… alongside providing an increase in funding for this year and next…

… I set the envelope for the Spending Review…

… which we will deliver in June…

led by my RHF the Chief Secretary to the Treasury

… to set departmental budgets until 2028-29 for day-to-day spending…

… and until 2029-30 for capital spending.

Today, I am reflecting two steps that we have taken in our spending plans.

First, because we are living in an uncertain world…

… as the Prime Minister has set out…

… we will increase defence spending to 2.5% of GDP, reducing overseas aid to 0.3% of Gross National Income.

This means we save £2.6bn in day-to-day spending in 2029-30…

… to fund our more capital-intensive defence commitments.

Second, in recent months, we have begun to fundamentally reform the British state…

… driving efficiency and productivity across government…

… to deliver tangible savings…

… and improve services across our country.

Earlier this month, the Prime Minister set out our plans to abolish the arms-length body NHS England…

… and ensure that money goes directly to improving the service for patients.

My Right Honourable Friend the Health Secretary is driving forward vital reforms to increase NHS productivity…

… bearing down on costly agency spend…

… to save money so that we can improve patient care.

And my Right Honourable Friend the Chancellor of the Duchy of Lancaster is taking forward work to significantly reduce the costs of running government…

… by 15%, worth £2bn, by the end of the decade.

This work shows that we can make our state leaner, and more agile…

… delivering more resources to the frontline…

… while ensuring we control day-to-day spending to meet our fiscal rules.

Today, I build on that work…

… by bringing forward £3.25bn of investment…

… to deliver the reforms that our public services need…

… through a new Transformation Fund.

That is money brought forward now…

… to bring down the costs of running government by the end of the forecast period…

… by making public services more efficient, more productive and more foucssed on the user.

I can confirm today the first allocations from this fund…

… including funding for Voluntary Exit Schemes to reduce the size of the Civil Service…

… pioneering AI tools to modernise the state…

… investment in technology for the Ministry of Justice to deliver probation services more effectively…

… and up-front investment so we can support more children in foster care…

… to give them the best possible start in life…

… and reduce cost pressures in the future.

Our work to make government leaner…

… more productive…

… and more efficient…

… will help deliver a further £3.5bn of day-to-day savings by 2029-30.

Overall, day-to-day spending will be reduced by £6.1bn by 2029-30…

… and it will now grow by an average of 1.2% a year above inflation…

… compared to 1.3% in the Autumn.

Mr Speaker, I can confirm to the House that day-to-day spending will increase in real terms, above inflation, in every single year of the forecast.

And in the Spending Review, apart from the reduction in overseas aid…

… day-to-day spending across government has been fully protected.

I can also confirm our approach to capital investment.

In the Autumn Budget I announced £100bn of additional capital spending…

… to crowd in investment from the private sector…

… to fix our crumbling infrastructure…

… and to create jobs in every corner of our country.

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Today, I am instead increasing capital spending …

… by an average of £2bn per year compared to the Autumn…

… to drive growth in our economy…

… and to deliver in full our vital commitments on defence.

This government will ensure that every pound we spend will deliver for the British people…

… by increasing productivity…

… driving growth in our economy…

… and improving our frontline public services.

Mr Speaker, let me turn now to the impact of increased uncertainty on our economy.

To deliver economic stability, we must work closely with the Bank of England…

… supporting the independent Monetary Policy Committee to meet their 2% inflation target.

There have been three interest rate cuts since the General Election and today’s data showed that inflation fell in February.

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… the OBR forecast that CPI inflation will average 3.2% this year…

… before falling rapidly to 2.1% in 2026 and meeting the 2% target from 2027 onwards…

… giving families and businesses the security that they need…

… and providing our economy with the stable platform it needs to grow.

Mr Speaker…

… earlier this month, the OECD downgraded this year’s growth forecast for every G7 economy, including the UK.

And the OBR have today revised our growth forecast for 2025…

… from 2% in the autumn…

… to 1% today.

I am not satisfied with these numbers.

That is why we on this side of the house are serious about taking the action needed to grow our economy.

Backing the builders, not the blockers…

… with a third runway at Heathrow Airport…

… and the Planning and Infrastructure Bill.

Increasing investment…

… with reforms to our pension system…

… and a new National Wealth Fund.

And tearing down regulatory barriers…

… in every sector of our economy.

That is a serious plan for growth.

That is a serious plan to improve living standards.

That is a serious plan to renew our country.

Mr Speaker, a changing world presents challenges.

But it also presents new opportunities.

For new jobs.

… and new contracts…

… in our world-class defence industrial centres…

… from Belfast to Deeside, and from Plymouth to Rosyth.

In February, the Prime Minister set out our government’s commitment to increase spending on defence to 2.5% of GDP from April 2027…

The biggest sustained increase in defence spending since the end of the Cold War

…and an ambition to spend 3% of GDP on defence in the next parliament.

That was the right decision in a more insecure world…

… putting an extra £6.4bn into defence spending by 2027.

But we have to move quickly in this changing world.

And that starts with investment.

So today I can confirm that I will provide an additional £2.2bn for the Ministry of Defence in the next financial year…

… a further downpayment on our plans to deliver 2.5% of GDP by 2027.

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 its 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, in Derby and in Newport…

… creating demand for highly skilled engineers and scientists…

… and delivering new business opportunities for UK tech firms and start-ups.

We will establish a protected budget of £400m within the Ministry of Defence…

… a budget that will rise over time for UK Defence Innovation…

… with a clear mandate to bring innovative technology to the front line at speed.

We will reform our broken defence procurement system…

… making it quicker, more agile and more streamlined….

… and giving small businesses across the UK better access to Ministry of Defence contracts.

Something welcomed by the Federation of Small Businesses.

We will take forward our Plan for Barrow, a town at the heart of our nuclear security…

… working with my Honourable Friend the Member for Barrow and Furness…

… and providing £200m, supporting the creation of thousands of jobs there.

We will regenerate Portsmouth naval base, securing its future…

… as called for by my Honourable Friend the Member for Portsmouth South.

We will secure better homes for thousands of military families… the homes that they deserve [political content redacted].

… homes for our military families in the constituencies of my Honourable Friends for Plymouth Moor View, Plymouth Sutton & Devonport, York Outer and in Aldershot.

That is the difference that this [political content redacted] government is making.

Finally, Mr Speaker, we will provide £2bn of increased capacity for UK Export Finance…

… to provide loans for overseas buyers of UK defence goods and services…

Because I want to do more with our defence budget so we can buy and make and sell things here in Britain.

… giving further opportunities for our world leading defence companies and those who work in them…

… to grow and create jobs here in Britain…

… as military spending rises right across Europe.

To oversee all of this vital work…

… my Right Honourable Friend the Defence Secretary and I will establish a new Defence Growth Board…

… to maximise the benefits from every pound of taxpayers’ money that we spend.

And we will put defence at the heart of our modern industrial strategy…

… to drive innovation that can deliver huge benefits back into the British economy.

Mr Speaker, that is how we make our country a defence industrial superpower…

… so the skills of the future…

… the jobs of the future…

… and the opportunities of the future…

… can be found right here in the United Kingdom.

Mr Speaker, [political content redacted] there are no shortcuts to economic growth.

It will take long-term decisions.

It will take hard yards.

It will take time for the reforms that we are introducing to be felt in the everyday economy.

It is right that the Office for Budget Responsibility consider the evidence…

… and look carefully at measures before recognising a growth impact in their forecast.

But, Mr Speaker, I can announce to the House…

… that the OBR have considered – and have scored – one of the central planks of our plan for growth.

In my first week as Chancellor, I announced that we were pursuing the most ambitious set of planning reforms in decades…

… to get Britain building again.

And in December - we published changes to the National Planning Policy Framework…

… driven forward tirelessly by my Right Honourable Friend the Deputy Prime Minister…

… reintroducing mandatory housing targets…

… and bringing “grey belt” land into scope.

The OBR have today concluded that these reforms will permanently increase the level of real GDP…

… by point 0.2% by 2029-30…

… an additional £6.8bn in our economy…

… and by point 0.4% of GDP within 10 years…

… an additional £15.1bn in our British economy.

Mr Speaker, that is the biggest positive growth impact that the OBR have ever reflected in their forecast, for a policy with no fiscal cost.

And taken together with our plans to increase capital spending that we set out in the Budget last year…

… this government’s policies will increase the level of real GDP by point 0.6% in the next ten years.

Mr Speaker, that is the difference that this [political content redacted] government is making.

Policies to grow our economy.

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The OBR have concluded that our reforms will lead to housebuilding reaching a forty-year high…

… of 305,000 a year by the end of the forecast period.

And 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 our manifesto promise to build 1.5 million homes in England in this parliament.

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The impact on our economy goes further still.

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We need economic growth.

So I can today confirm…

… that the effect of our growth policies…

… including our planning reforms…

… means an additional £3.4 billion to support our public finances and our public services by 2029-30.

The proceeds of growth.

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Mr Speaker, earlier this week…

… we provided an additional £2bn of investment in social and affordable homes next year…

… delivering up to 18,000 new homes…

… and allowing local areas to bid for new developments across our country…

… including sites in Thanet, in Sunderland and in Swindon.

More security for families across our country.

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And to build these new homes…

… we need people with the right skills.

Earlier this week, my Right Honourable Friend the Education Secretary announced more than £600m…

… to train up 60,000 more construction workers…

… including with 10 new Technical Excellence colleges across every region of our country…

… giving working people the chance to fulfil their potential.

New opportunities for our young people.

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Mr Speaker, all this is just the start.

The Planning and Infrastructure Bill passed its second reading on Monday.

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Once this Bill completes its passage…

… it will help deliver the homes and infrastructure our country badly needs.

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And today, I can confirm to the House…

… that the OBR have upgraded their growth forecast next year…

… and every single year thereafter…

… with GDP growth of 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.

Mr Speaker,

By the end of the forecast…

… our economy is larger compared to the OBR’s forecast at the time of the Budget.

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But Mr Speaker, this isn’t just about lines on a graph.

It is about improving people’s lives.

Working people are still feeling the pinch after a cost of living crisis [political content redacted] that saw prices spiral.

So I am pleased that the OBR confirm today …

… that Real Household Disposable Income…

… will now grow this year at almost twice the rate expected in the autumn.

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… and after taking into account inflation…

… the OBR say today…

… that people will be on average over £500 a year better off under this [political content redacted] government.

That will mean more money in the pockets of working people. Higher living standards.

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Mr Speaker, the world is changing.

We can see that…

… and we can feel it.

A changing world demands a government that is on the side of working people.

Acting in their interest.

Acting in the national interest.

Not retreating from challenges.

Not stepping back.

But a government with the courage to step up…

… to secure Britain’s future…

… and to seize the opportunities that are out there before us.

I am impatient for change, the British people are impatient for change, [political content redacted].

And we are beginning to see change happen.

Our Plan for Change is working.

Defence spending is rising.

Waiting lists are falling.

Wages are up.

Interest rates are cut.

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And today, Mr Speaker…

… the OBR confirm…

… that our plan to get Britain building…

… will drive growth in our economy…

… and put more money in people’s pockets.

There are no quick fixes.

But we have taken the right choices.

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Delivering security for our country and security for working people.

That is what drives this government.

That is what drives me as Chancellor.

And that is what drives the choices that I have set out today.

And I commend this statement to the House.