Chancellor Rachel Reeves insisted she has the ‘right economic plan’ for the UK in her Spring Forecast Statement announcement. However, the event took place against a backdrop of economic uncertainty caused by war in the Middle East.
Ms Reeves pledged to chart a course through the turbulence in a speech that focused heavily on economic growth, the cost of living and public borrowing.
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Uplift in defence spending
Last year’s Spring Statement focused on a commitment to increasing defence spending. This year Ms Reeves reiterated that she is ‘proud’ to be the chancellor ‘delivering the biggest uplift in defence spending since the Cold War’.
Growth forecast
The Office for Budget Responsibility (OBR) cut its growth forecast for this year to 1.1% from 1.4%. However, it said the economy will grow faster in 2027 and 2028.
The OBR’s forecast shows GDP per person is now set to grow more than was expected in the Autumn Budget, with growth of 5.6% over the course of this Parliament.
Cost of living
In addition, Ms Reeves said she was cutting the cost of living, including reducing people’s energy bills by £150 and freezing rail fares.
The Chancellor also highlighted the six cuts in the base rate of interest rates since the government came to power at the 2024 General Election.
She says this is the fastest pace and reduction in interest rates in 17 years.
The OBR’s forecast shows inflation, borrowing and debt interest are falling, whilst investment is rising.
Public borrowing
The Chancellor also said she has cut public borrowing, which the OBR said is down by nearly £18 billion compared to the autumn, with borrowing this year set to be the lowest in six years and falling below the G7 average.
Public sector net borrowing is projected to fall from 5.2 % of GDP in 2024/25 to 4.3% of GDP this year and then to 1.6% in 2030/31.
The right plan
The Chancellor concluded:
My plan is the right one. I am in no doubt about how great the rewards can be if we stay the course. The forecasts today confirm that the choices this government has made are the right ones.
Stability in our public finances, interest rates and inflation falling, living standards rising, more children lifted out of poverty, more appointments in our NHS, more investment in our infrastructure, a growing economy and more money in the pockets of working people.