Key announcements from the 2025 Spring Statement

Earlier today, Chancellor Rachel Reeves delivered the highly anticipated Spring Statement to Parliament, providing an update on the state of the UK economy and outlining the government's fiscal plans for the coming year. In her speech, the Chancellor addressed key areas such as public spending and infrastructure investment, offering insights into how the government intends to navigate current economic challenges and foster growth.

The Spring Statement, traditionally a response to the Office for Budget Responsibility's (OBR) economic forecasts, included measures aimed at ensuring financial stability amidst global economic shifts. Just before the statement it was announced that in February 2025, the Consumer Prices Index (CPI) decreased to 2.8%, down from 3.0% in January. The OBR predicts that inflation will continue to decrease, reaching 2% by 2027.

What the Spring Statement could mean for your financial plans

The good news is that the Spring Statement announcements are not expected to have a direct impact on your financial plans. The measures outlined by Chancellor are aimed at ensuring long-term economic stability and growth, which could provide a stable environment for your investments and financial planning.

It is essential to remember though that we have yet to see the impact of key announcements from the October Budget, such as changes to Inheritance Tax (IHT) and business relief. Additionally, from April 2027, it is expected that pension pots passed to future generations will form part of an estate for IHT purposes. Clarity on these points is needed to give greater certainty to clients so that they can plan to pass on their wealth accordingly.

Also included in the Statement but not referenced in the dispatch box was that the government is exploring ways to improve Individual Savings Accounts (ISAs). They want to help savers potentially earn better returns by balancing cash and equity investments. These reforms aim to encourage more people to invest in retail markets and support economic growth.

Alice Harmer, Personal Wealth Adviser at SPW, states, “Although there has been a downgrade in the growth forecast for this year, it is expected that we may see positive growth over the next few years which would indicate we could see some stability for our clients. However, it’s important to remain vigilant and to regularly review your investments and plans.

We are still awaiting the results of the technical consultations on the IHT changes that were announced in the October Budget which we know our clients have been concerned about. However, we are also mindful of the high tax burden on our clients. The public now faces a historically high tax burden due to previous policy announcements which this Statement does nothing to address. But, we will be on hand to help them every step of the way.”

Ensuring that you make the most of your Individual Savings Account (ISA) and pension tax allowances could positively impact your financial health and long-term stability. With the current economic climate, we believe having a robust, personalised financial plan is key to navigating uncertainties and achieving your long-term goals.

What was announced?

Chancellor Rachel Reeves has adhered to her fiscal rules, which mandate that the budget for day-to-day spending must balance by the 2029-30 financial year and that government debt must fall as a percentage of GDP (gross domestic product) by 2027.

Despite the challenging economic environment, she has maintained these rules by implementing strategic spending cuts and avoiding further tax increases or additional borrowing. Her commitment to these rules is evident in the Spring Statement, which confirmed the £5 billion in welfare cuts announced last week, alongside other efficiency savings to ensure fiscal discipline.

Welfare system reforms: The government is reforming the welfare system to make it more sustainable and support people back into work. The Universal Credit standard allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30. However, the Universal Credit Health element will be cut by 50% and then frozen for new claimants.

Tax evasion crackdown: The government is investing in cutting-edge technology and increasing HMRC's capacity to crack down on tax avoidance. This initiative aims to raise an additional £1 billion, bringing the total revenue from reducing tax evasion to £7.5 billion

Defence spending: The government is increasing defence spending, with an additional £2.2 billion allocated next year. This is part of a broader plan to spend 2.5% of GDP on defence by 2027. The investment is intended to boost both national and economic security

Economic growth initiatives: The government is prioritising economic growth by speeding up infrastructure approvals, building more homes, and reducing administrative costs for businesses.

The Office for Budget Responsibility (OBR) has revised its growth forecast for 2025, halving it from 2% to 1%. This downgrade reflects the deteriorating economic outlook and rising borrowing costs. The OBR's forecast highlights the challenges facing the UK economy, including lower-than-expected growth and higher debt repayment costs.

Although economic growth is expected to halve this year, it is projected to increase over the next couple of years. Growth is forecast to reach 1.9% in 2026 and 1.8% in 2027, providing stability and a more positive outlook for the future.