Rachel Reeves will argue the ‘world is changing’ as she delivers the Spring Statement on Wednesday in the Commons. Here The Mirror looks at what the Chancellor could announce
Rachel Reeves will deliver her long-awaited Spring Statement this week amid growing fears of deep cuts to public services.
The Chancellor is set to argue the world has changed since she delivered the first Labour Budget in almost 15 years back in October 2024 as she justifies a hike in defence spending to counter Russian aggression. But with grim figures expected from the Office for Budget Responsibility (OBR) watchdog on growth forecasts, Ms Reeves faces difficult decisions as she attempts to balance the books.
Keir Starmer and Ms Reeves already face a growing backlash from their own benches over welfare reform, and anger is likely to grow further as billions are sliced from the Whitehall budget.
Wednesday’s statement also comes as Ms Reeves attempts to navigate rising borrowing costs and economic pressures such as tariffs on steel and aluminium. Here The Mirror looks at what could be in the Chancellor’s Spring Statement.
When is the Spring Statement and what is it?
The Chancellor will deliver the Spring Statement to the Commons around 12.30pm on Wednesday – shortly after PMQs – to update on the state of the nation’s finances.
She will first present the updated forecasts from the Office for Budget Responsibility (OBR), with many expecting gloomier figures than those published in October 2024 and growth rates halved.
Unlike a Budget there is not expected to be any major tax changes, but Ms Reeves is expected to make a string of announcements aimed at putting the public purse on an even keel. In recent week she has faced intense pressure over increased borrowing costs and the impact of Donald Trump’s tariffs that were not known when she set out her Budget six months ago.
Due to the government’s self-imposed fiscal rules, it means there are likely to be real-terms cuts to government departments as the government attempts to balance the books.
Benefit cuts
Work and Pensions Secretary announced around £5billion in cuts to sickness and disability benefits last week in a move that has caused anger among Labour MPs. But many of the key details were missing, including where exactly the savings will be made.
It is expected the bulk of cuts will come from tightening eligibility for Personal Independent Payments (PIP) – a key disability benefit. The government also failed to set out how many people this would impact last week and instead insisted details will be revealed at the Spring Statement.
But the Resolution Foundation believes the changes to PIP could result in between 800,000 and 1.2million losing support of between £4,200 and £6,300 per year by 2029-30.
Ms Kendall has also promised to publish an impact assessment of the reforms, which are expected to detail how they will impact poverty levels in the UK. Expect fireworks from Labour MPs if more grim details of the cuts are revealed.
No major tax changes
Treasury officials are keen to highlight the Spring Statement is not a Budget – or an “emergency Budget” as the Tories’ have suggested – and no major tax changes will be announced on Wednesday.
At the Budget last year the Chancellor Ms Reeves unveiled a £40billion hike in taxes – mainly hitting firms with an increased national insurance levy. She described the package as one needed to plug the £22billion gap in public finances left by the Tories and to fix the NHS – but “not the sort of Budget we would want to repeat”.
Last week Keir Starmer raised eyebrows as he failed to repeat the Chancellor’s vow not to extend the freeze on income tax thresholds ahead of the Spring Statement.
Thresholds were initially frozen by the previous Conservative government until April 2028. But it is understood that changes to the tax regime are not expected next week.
Defence spending hike
Expect the Chancellor to set out more details of plans to fund Keir Starmer’s vow to hike defence spending last month.
Responding to global volatility and pressure from Donald Trump, the Prime Minister said the UK’s spending on defence would increase to 2.5% of GDP by 2027. He described it as the biggest hike in defence spending since the Cold War as he pointed to the dangers posed by Vladimir Putin and Russian aggression.
But in a controversial move the PM announced there would be billions of pounds in cuts to overseas aid to fund the move – prompting outrage from humanitarian groups. Ms Reeves is expected to give details on how the funding will be reallocated to defence.
A line-by-line review was commissioned into all the UK’s aid spending as Mr Starmer promised to maintain support to victims of warfare in Gaza, Ukraine and Sudan. But many are dubious about whether this can be achieved, with Anneliese Dodds quitting as development minister in protest.
Ms Dodds hit out at the decision to cut overseas development aid to 0.3% of GNI (gross national income).
Government department cuts
In her Budget, Ms Reeves set out an average growth of 1.3% for Whitehall departments. This was already a tricky ask, with inflation at around 3%.
But it could turn out even trickier, with the Chancellor expected to downgrade this further on Wednesday. The Institute for Fiscal Studies (IFS) think-tank estimates that by allowing for 1.1% growth instead, around £5billion a year could be saved per year in the next five years.
But this will affect different departments differently. Expected rises to spending in areas including the NHS, schools and defence will mean other parts of Whitehall will feel it worse.
This is bad news for the Ministry of Justice, the Home Office and local government, the IFS says, as they could see funding drop by 1.9% a year. This would mean a massive cut of 7% over the course of this Parliament.
Civil service job cuts
The Chancellor said on Sunday around 10,000 civil service jobs will be cut in a bid to save around £2billion-per-year by 2029-2030. “We are, by the end of this Parliament, making a commitment that we will cut the costs of running government by 15%,” Ms Reeves told the BBC.
A Cabinet Office source added: “To deliver our Plan for Change we will reshape the state so it is fit for the future. We cannot stick to business as usual. By cutting administrative costs we can target resources at frontline services – with more teachers in classrooms, extra hospital appointments and police back on the beat.”
But the Public and Commerical Services Union General Secretary, Fran Heathcote, said any cuts will have an impact on frontline services.
She added: “You hear that every day from the public, that they wait too long on the phone when they try to make tax payments, jobseekers rushed through the system in just ten minutes because there aren’t enough staff to see them, victims of crime waiting until 2027 to have their cases heard in the courts as well as the backlog in the asylum system which results in additional hotel costs.
“The impact of making cuts will not only disadvantage our members but the public we serve and the services they rely on.”
Bonfire of quangos and regulators
The Government has already pledged to stop outsourcing decisions to arms-length government organisations.
Mr Starmer’s surprise decision to scrap NHS England – the world’s biggest such organisation, known as a quango – is thought to be the first of many cases to come. Ministers have also vowed to cut the cost to businesses of complying with regulators.
They want to carve 25% from these expenses. Mr Starmer said previous governments have “created a watchdog state completely out of whack with the priorities of the British people”.
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