What we learnt from Rachel Reeves’ spring statement – and what it means for you
Rachel Reeves insisted she has the “right economic plan” for the country despite the budget watchdog cutting its growth forecast for the year and growing fears over the impact of war in the Middle East.
After Ms. Reeves promised that only one major fiscal event (in the form of the fall budget) would occur each year, there were no tax and spending changes in her spring statement.
Instead, he offered a broad update on the country’s financial situation in the face of increasing global instability.
Here, Independent It looks at everything we’ve learned and what it means to you.
Energy prices
The chancellor said he will meet North Sea industry leaders on Wednesday to discuss skyrocketing gas and oil prices due to Iran’s threats to a critical shipping route.
The statement comes as the Office for Budget Responsibility (OBR) warned that the “escalating” conflict in the Middle East “could have very significant impacts on the global and UK economies” as experts finalize their forecasts.
They add that when it comes to the global economy, these risks are “especially in energy markets.”
The OBR’s official report, published alongside its spring statement, warns that “the geopolitical situation and global trade policy remain highly fluid”.
The chancellor’s planned meeting with North Sea bosses will lead to speculation that tax burdens may be taken into account, as the industry lobbies hard to scrap the windfall.
The tax, currently set at 38 percent, was implemented in May 2022 during the previous government’s term, after profits increased rapidly due to the increase in energy prices following Russia’s invasion of Ukraine.
The government has announced it is consulting on plans to replace the tax, which expires in 2030, with a new regime aimed at providing greater certainty to the industry and protecting consumers against future shocks.
Homes in England are unlikely to see an immediate impact on their energy bills due to the escalating crisis, experts say. Gas wholesale prices factor into the energy price cap set by UK regulator Ofgem, and these global events will be taken into account in the next price cap – but this will only apply from July.
Growth forecasts
Britain’s growth has been downgraded for this year, with the OBR saying gross domestic product will rise 1.1 per cent in 2026, down from a 1.4 per cent forecast in November.
However, the watchdog raised its forecasts for 2027 and 2028 from 1.5 percent to 1.6 percent.
Ms Reeves told the House of Commons: “Last year we demonstrated the resilience of the British economy in the face of global headwinds, with the fastest growth of any G7 country in Europe.
“Today the Office for Budget Responsibility has updated its growth forecasts to also reflect lower net migration, with average growth remaining broadly unchanged over the forecast period, while the OBR has adjusted its GDP profile to grow slightly slower in 2026 and faster in 2027 and 2028.”
He added: “After accounting for inflation, it is estimated that people will be over £1,000 a year better off by the next election.”
network migration
The OBR said net migration, which represents the overall change in population as a result of migration, was set to fall.
“We have lowered our central estimate of overall net internal migration by an average of 60,000 people (50,000 adults) per year. This is entirely due to a more negative assumption about net migration of British nationals,” the forecaster said.
It follows the announcement of a number of policies, including raising the minimum earnings threshold for workers from abroad from £26,200 to £38,700, to clamp down on people coming to the UK to reduce net migration.
employment
The Chancellor said unemployment would peak later this year and fall in each year of the forecast period, finishing the period at 4.1 per cent, which would be lower than the level at the start of parliament.
The OBR said the unemployment rate will rise to 5.3 per cent this year, from a forecast of 4.9 per cent in November, while rates in 2027 and 2028 will also be higher than expected in the autumn.
The watchdog said those joining the workforce “are having difficulty finding jobs due to low hiring demand.”
Slower wage growth will also contribute to lower inflation forecasts; The consumer price index will fall from 3.4 per cent in 2025 to 2.3 per cent this year, reaching the Bank of England’s two per cent target from 2027.
What wasn’t included?
Tax or spending policies
Today’s spring statement included no new tax cuts or spending measures, as a result of the chancellor’s promise that his autumn budget would feature only one major fiscal event each year.
Ms Reeves vowed to continue with the government’s current economic plan, insisting it was the right plan and “even more important” given the crisis.
He argued that “it is my duty and that of this government to chart a path through this uncertainty.”
Student loan changes
Criticism of the student loan system has been mounting in recent weeks, with Labor MPs speaking out against “rip-off” interest rates and unfair changes to repayment terms.
It comes after the Chancellor used his last budget to freeze the salary threshold, where repayments start at £29,385 for three years, resulting in many graduates having to pay more.
There was growing expectation that there would be some changes to the student loan system in Sir Keir Starmer’s spring statement after he said he would look at ways to make the loan system fairer. However, today’s statement did not include such a change in the system.
