26 Mar Key takeaways from Rachel Reeves’ Spring Statement 2025
Chancellor Rachel Reeves’ Spring Statement struck a deliberate tone of caution – a response to a challenging fiscal landscape, rising borrowing costs and a global economy in flux.
This was not a moment for giveaways, but rather for reshaping priorities and demonstrating a commitment to long-term planning.
The Chancellor confirmed the economic growth forecast for 2025 has been cut to 1%, down from a previous estimate of 2%, with inflation projected to return to 2% by 2027. Publicly, Reeves acknowledged the pressures: “I am not satisfied with these numbers,” she said, while making the case for a more active state and restrained fiscal management.
Among the headline announcements was £4.8bn in welfare savings, including a 50% reduction – and freeze – of the Universal Credit health element for new claimants. While the standard allowance will rise modestly over the coming years, the government is banking on wider welfare reform to close the fiscal gap.
The public sector will also see transformation, with a £3.25bn fund established to reduce running costs through exit schemes, AI and modernisation. Departments will be expected to make efficiency savings, although the Chancellor insisted day-to-day spending will still rise in real terms over the review period.
A focus on skills and infrastructure underpinned the government’s ambition to “get Britain building again”. This includes £600m to train 60,000 construction workers and a £2bn commitment to affordable housing – both seen as foundational to delivering growth and easing pressure on overstretched sectors.
The Chancellor also announced a £2.2bn increase in defence spending, with a path to raising the budget to 2.5% of GDP by 2027. This investment is expected to support not only national security but domestic industry – including defence manufacturing and engineering supply chains.
For Scotland, several points will draw particular attention. The lack of a firm funding decision on the Acorn carbon capture project near Peterhead leaves uncertainty hanging over a key part of the country’s net-zero ambitions. Meanwhile, defence spending could present industrial opportunities, especially in engineering sectors. On public services, the debate continues around whether UK departmental efficiency targets will impact devolved budgets.
The hospitality industry in Scotland has also raised concerns. UK Hospitality called the Spring Statement a “missed opportunity” to avoid an April tax rise that will add £3.4bn to employer National Insurance bills. Chief executive Kate Nicholls warned it could force businesses to “freeze recruitment” and “reduce hours” – a particular worry for a sector that remains a major employer across many Scottish communities.
More broadly, the statement offered little direct relief for local businesses, and uncertainty remains over the future direction of tax policy for both individuals and companies.
The Chancellor said this was a moment to “restore stability to the public finances” and deliver a more resilient, forward-facing economy.
Shadow Chancellor Mel Stride dismissed the statement as “an emergency budget in all but name,” warning that the government was relying on spending cuts without a clear plan for growth.
The challenge now lies in implementation – ensuring that headline intentions are translated into practical results, and that the balance between restraint and investment will actually deliver long-term economic resilience.
Key points:
- Economy: Growth forecast cut from 2% to 1% (OBR). “I am not satisfied with these numbers,” said Reeves.
- Taxation: £1bn to be raised through tougher action on tax evasion, supported by new HMRC tech investment.
- Welfare: £4.8bn in savings, including a 50% cut to the Universal Credit health element for new claimants.
- Defence: £2.2bn uplift this year, with defence spending to rise to 2.5% of GDP by 2027. £400m Defence Innovation Fund confirmed.
- Public Sector: £3.25bn Transformation Fund to reduce running costs via exit schemes, AI tools and digital reform.
- Housing & Skills: Plans to deliver 1.5 million homes; £2bn for affordable housing and £600m to train 60,000 construction workers.
- Infrastructure: Backing confirmed for Heathrow’s third runway; planning reform to support growth.