Live: UK growth forecast halved to 1%, Rachel Reeves says
Rachel Reeves has used her spring statement to announce a series of public spending cuts in order to balance the books without raising taxes.
The Chancellor blamed “increased global uncertainty” as the budget watchdog warned she would have missed her goal of balancing the books without action.
She was forced to set out savings of around £14 billion to ensure she met her “non-negotiable” goal of balancing day-to-day spending against tax receipts, rather than borrowing.
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We are ending our live coverage now. Thank you for reading.
Rachel Reeves is due to host a press conference in Downing Street from 4.15pm after visiting a military base this afternoon.
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Government spending on health and disability benefits is forecast by the OBR to reach £97.7 billion in 2029/30, revised down from £100.7 billion in the forecast made at the budget in October 2024.
This represents a jump of 48% from £66.3 billion in 2023/24.
“Health and disability spending rises by 0.4 per cent of GDP even after the impact of the welfare measures included in this spring statement,” the OBR said.
Total spending on welfare is forecast to rise from £296.4 billion in 2023/24 to £373.4 billion in 2029/30, an increase of 26%.
It was previously forecast to rise by 27% over this period to the slightly higher total of £377.7 billion.
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An estimated quarter of a million people, including 50,000 children, would be pushed into relative poverty by the end of the decade as a result of welfare reforms, the Government’s own impact assessment has said.
The document, published on Wednesday after Chancellor Rachel Reeves delivered her spring statement in parliament, said: “The potential impact of these reforms on poverty projections has been estimated using a static microsimulation model.
“Using this model, we estimate there will be an additional 250,000 people (including 50,000 children) in relative poverty after housing costs in 2029/30 as a result of modelled changes to social security, compared to the baseline projections.”
The document stated the estimate does not include the impact of the £1 billion annual funding, by 2029/30, for measures supporting people into work “which we expect to mitigate the poverty impact”.
It added that its analysis does not take into account new protections for those with severe lifelong conditions that the Government intends to bring forward.
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Rachel Reeves described opposition parties as “the anti-growth coalition” and said the Tories’ only plan for change is to “change their party leader”.
She told the Commons: “The world is changing and no-one can be in any doubt about it, but the Conservative Party is stuck in the past, divided, out of touch and carping from the sidelines.
“They have no plan – no plan to kickstart growth, no plan to fix our public services, no plan to keep our country safe. The only plan for change they are working on is to change their party leader, and we can’t blame them for that.
“So, if they have no plan, let me remind them about ours. The minimum wage up, real wages up, housebuilding up, NHS investment up, investment in our schools up, investment in our roads up, defence spending up.
“Every single one of those policies opposed by the parties opposite, opposed by the Conservatives, opposed by Reform, opposed by the SNP, opposed by the Liberal Democrats and opposed by the Greens. It’s the anti-growth coalition. They are the blockers. We are the builders, securing Britain’s future, protecting working people and delivering change.”
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The Chancellor has defended her claim that she restored the fiscal headroom “in full”.
Responding to her shadow counterpart Mel Stride, Rachel Reeves said: “I know the shadow chancellor hasn’t been in this role for very long, but, I mean, at least he’s not misquoting Shakespeare today.
“If this was a budget, then it would be the Leader of the Opposition (Kemi Badenoch) responding. Now, I’m glad that she’s still in her place. I know that she’ll want to get back to her office for a lunchtime steak soon.”
She added: “He asked, what should the markets make? But what the market should see is that when I’ve been tested with the deterioration in the headroom, we have restored that headroom in full. That’s the choice that I made.
“He says that it’s a slither of a headroom. Well, it’s 50% more headroom than I inherited from the party opposite. When I was left with a sliver of headroom I rebuilt it after the last government eroded it. That is the difference that we have made.”
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Government borrowing has been revised upwards in every year of the OBR forecast.
Total public sector net borrowing in 2024/25 is now forecast to be £137.3 billion, up from £127.5 billion which was forecast at the October 2024 budget.
It is then forecast to be £117.7 billion in 2025/26, up from the previous forecast of £105.6 billion; £97.2 billion in 2026/27, up from £88.5 billion; £80.2 billion in 2027/28, up from £72.2 billion; and £77.4 billion in 2028/29, up from £71.9 billion.
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Shadow chancellor Mel Stride said there had been more last-minute changes to the Government’s welfare policy than the Chancellor’s LinkedIn profile.
He told the Commons: “When they got into office, they pussy-footed around and dithered. Why? Because it’s deeply divisive within their rank and file.
“And then, suddenly, when the Chancellor decided that she had run out of money, out the word went to find some savings in welfare, to scrabble around, to yank every lever … possible.
“The spectacle, frankly, of what the OBR (Office for Budget Responsibility) has said about the changes that were only announced last week by the Secretary of State for Work and Pensions is simply shambolic. We have gone from incompetence to chaos.
“There have been more changes in this policy than there were, at the last minute, to the profile of (Rachel Reeves) on LinkedIn.”
There have been more changes in this policy than there were, at the last minute, to the profile of (Rachel Reeves) on LinkedIn
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A coalition of more than 100 disability organisations has said further cuts to welfare will “heighten alarm” among claimants.
Charles Gillies, co-chairman at the Disability Benefits Consortium, said: “The Chancellor has chosen to double down on harmful benefits cuts, despite warnings this approach will push more disabled people into poverty and worsen people’s health.
“Since the cuts were announced last week, we’ve seen an outpouring of fear and dread from disabled people, including many with MS.
“The extra cuts announced today will heighten alarm even further, largely hitting those who are unable to work and rely on these benefits to survive.
“People are wondering how they’ll continue to cover their basic living expenses and the extra costs of their disability – like visits from carers to help with things like washing, cooking and going to the toilet. The Government has a moral obligation to scrap these cuts before the real damage is done.”
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Shadow chancellor Mel Stride pressed Rachel Reeves to increase defence spending to 3% of GDP in this parliament.
He urged the Chancellor to “go further”, adding: “The 3% target should be brought forward to this parliament. So, can I ask (Ms Reeves), given the geopolitical tensions that she has raised, what provision has she made in her headroom, in her fiscal plans, for increasing defence spending more quickly in this parliament, if that proves necessary?”
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Oxfam said the spring statement marked ” a new low in the fight against poverty and inequality”.
The charity’s senior policy adviser Anna Marriott said: “Today marks a new low in the fight against poverty and inequality as the Government chooses to cut vital international aid and social security support for millions of people struggling at home and around the world while protecting the soaring wealth of millionaires and billionaires.
“Three-quarters of the British public back Government tax increases on the very richest instead of these cruel and unnecessary cuts, but the Chancellor has decided to turn her back on fairness.
“These cuts are not just numbers on a balance sheet but will cost lives and have a devastating impact on people facing conflict, poverty and climate disasters around the world.
“It’s not about tough decisions; it’s about political choices. The Government must stop protecting extreme wealth and start protecting people.”
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Conservative shadow chancellor Mel Stride has accused Labour leaders of having “reneged on their promises to the British people” during last year’s general election.
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Mel Stride pointed to a series of economic indicators, including inflation, being higher than when the Conservative Party left office.
The shadow chancellor said: “Inflation, which was down to 2% bang on target on the very day of the last general election under a Conservative government. We are now told this year we’ll be running at twice the level of the forecast under ourselves in 2024.
“This is going to mean prices bearing down on households and on businesses, right across the country, because of her choices.”
He said the Office for Budget Responsibility also predicted unemployment will continue to rise successively in the next few years.
“So much for (Rachel Reeves’s) back to work plans,” Mr Stride said.
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Rachel Reeves’ spring statement is a “cold hard reckoning” with the state of the British economy, the shadow chancellor has said.
Mel Stride termed the Chancellor’s announcement as an “emergency budget” as he criticised falling growth rates in the UK.
He said: “At the last budget (Ms Reeves) said she would bring stability to the public finances – stability to the public finances – but this statement more appropriately referred to as an emergency budget has brought her to a cold, hard reckoning.
“She has become very fond recently about the world having changed. Well, indeed it has.
“This country was growing at the fastest rate in the G7 only about a year ago, and just as the OECD and the Bank of England and other forecasters and now we learn, the OBR have stated growth has been halved in this year.
“Cut in two as a consequence of the decisions and the choices that the right honourable lady made on her watch.”
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Chancellor Rachel Reeves said the OBR has upgraded their growth forecast “next year and every single year thereafter”, saying: “With GDP growth of 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.
“By the end of the forecast our economy is larger compared to the OBR’s forecast at the time of the budget.”
Ms Reeves added: “Compared to the forecast in the final budget delivered by the party opposite, and after taking account of inflation, the OBR say today that people will be on average over £500 a year better off under this Labour Government.”
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Chancellor Rachel Reeves said the effect of the Government’s growth policies is estimated to result in an “additional £3.4 billion to support our public finances and our public services by 2029-30”, which she dubbed the “proceeds of growth”.
Ms Reeves said the Planning and Infrastructure Bill would “help deliver the homes and infrastructure our country badly needs”, adding: “I say to the parties opposite: the British people will be watching.
“If the parties opposite don’t support these reforms, let us be clear about what that means – they are opposing economic growth, they are opposing more homes for families, they are opposing good jobs across our country.
“We on this side are clear about whose side we are on, the parties opposite must decide too.”
If the parties opposite don’t support these reforms, let us be clear about what that means – they are opposing economic growth, they are opposing more homes for families, they are opposing good jobs across our country
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Shadow chancellor Mel Stride has said that Chancellor Rachel Reeves “chose to be reckless” with fiscal headroom as he accused her of having “tanked the economy”.
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Rachel Reeves said the OBR had concluded the Government’s planning reforms would “help build over 1.3 million homes” in the next five years.
She said: “The planning system that we inherited was far too slow. The OBR have concluded that our reforms will lead to housebuilding reaching a 40-year high of 305,000 by the end of the forecast period.
“And changes to the national planning policy framework alone will help build over 1.3 million homes in the UK over the next five years taking us within touching distance of delivering on our manifesto promise to build 1.5 million homes in England this parliament.
“Homes promised by this Labour Government. Built by this Labour Government. Opposed by the parties opposite.”
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Chancellor Rachel Reeves has pledged to “boost Britain’s defence industry and to make the UK a defence industrial superpower”.
She added: “We will spend a minimum of 10% of the Ministry of Defence’s equipment budget on novel technologies including drones and AI (artificial technology) enabled technology.
“Driving forward advanced manufacturing production in places like Glasgow, Derby and Newport, creating demand for highly-skilled engineers and scientists, and delivering new business opportunities for UK tech firms and start-ups.”
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Chancellor Rachel Reeves has allocated an additional £2.2 billion to the Ministry of Defence’s budget for next year.
She said: “Today I confirm that I will provide an additional £2.2 billion for the Ministry of Defence next year, a further down payment on our plans to deliver 2.5% of GDP. This additional investment is not just about increasing our national security, but increasing our economic security, too.”
