Benefit cuts and civil service job reductions were announced today as part of Rachel Reeves’ sombre Spring Statement.
Facing a bleak economic outlook, the Chancellor took steps to trim Britain’s hefty welfare budget, announcing a significant £3.4 billion reduction. This move aims to address financial pressures while reallocating resources more effectively.
In addition, Ms Reeves confirmed that at least 10,000 civil service positions will be cut. The savings from these job reductions will be redirected to essential front-line services, such as law enforcement, to bolster public safety and strengthen community support.
However, the economic picture grew even grimmer with the Office for Budget Responsibility’s latest update. Their forecast for the UK economy in 2025 has been downgraded from a modest 2 per cent growth to just 1 per cent, adding further uncertainty to the nation’s financial future.
Here are the key announcements from the latest Spring Statement, divided into clear sections for better readability:
No New Tax Hikes:
The Chancellor ruled out introducing any new tax increases, instead focusing efforts on tightening tax collection. A crackdown on tax avoidance is expected to raise an additional £1 billion for the Treasury.
Downgraded Growth Forecast:
The Office for Budget Responsibility (OBR) delivered sobering news, slashing its GDP growth forecast for 2025. Originally projected at 2%, the estimate has been halved to just 1%.
Boosting Growth Through Planning Reforms:
Planning reforms, particularly in the housing sector, are anticipated to increase GDP by 0.6% over the next decade, aiming to stimulate long-term economic expansion.
Housing Construction Surge:
The Government is pushing for a significant rise in house building, with 1.3 million new homes expected to be constructed over the next five years. This initiative is set to bring housing construction to its highest levels in 40 years.
Increased Defence Spending:
An additional £2.2 billion in funding has been pledged to strengthen the UK’s defence budget, helping to meet the target of allocating 2.5% of GDP to national defence.
Defence Innovation Fund:
A £400 million Defence Innovation Fund has been announced to support the development of advanced technologies, including drones and artificial intelligence, for use on the front line.
Welfare Reform:
The Government plans to overhaul the welfare system by introducing targeted employment support aimed at reducing benefit spending and encouraging more people into work.
Civil Service Job Cuts:
To streamline Government operations, new voluntary exit schemes will be introduced, along with the use of AI tools, as part of efforts to reduce the size of the civil service.
The economic watchdog has issued a warning that inflation is on the rise. Projections show it will average 3.8 per cent in July this year before gradually declining to 2.1 per cent by 2026.
Unemployment figures are also expected to worsen, with the rate forecasted to climb to 4.5 per cent in 2025, compared to 4.3 per cent in 2024.
At the same time, Britain’s budget deficit will remain elevated at 4.8 per cent of GDP in the 2024-25 fiscal year, though it is predicted to gradually decrease, reaching 2.1 per cent by 2029-30.
In a more optimistic outlook, the Office for Budget Responsibility (OBR) projects that the measures announced in the Spring Statement will help the Treasury achieve a surplus of £6 billion by 2027-28, rising to £9.9 billion by 2029-30. Additionally, households are expected to be £500 better off annually by the end of the decade.
The reforms are also set to boost real GDP, though modestly, with a permanent increase of just 0.2 per cent, equating to £6.8 billion by 2029-30. Meanwhile, house-building is anticipated to reach its highest levels in 40 years.
Facing a critical audience on the Labour benches, Ms Reeves addressed concerns head-on, stating: “As the previous government learned to their detriment – there are no shortcuts to economic growth.
“It will take long-term decisions. It will take hard yards. It will take time for the reforms we are introducing to be felt in the everyday economy.”
Defending the cuts, which total billions of pounds, Ms Reeves explained: “Our task is to secure Britain’s future in a world that is changing before our eyes.
“The threat facing our continent was transformed when Putin invaded Ukraine. At the same time, the global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable and borrowing costs rise for many major economies.
“This moment demands an active government. A government not stepping back, but stepping up.”
As part of her welfare crackdown, the Chancellor announced a freeze on key Universal Credit payments for those unable to work due to illness. This freeze will remain in place until 2030, meaning that these payments will lose value each year as inflation drives up the cost of living.
A further blow to welfare recipients comes in the form of a minor cut to the basic Universal Credit rate in 2029, further reducing available support and saving additional money from the welfare budget.
Significant changes to disability payments, including Personal Independence Payment (PIP), will also take effect from 2026. Tougher eligibility tests and more face-to-face assessments will make it harder to qualify for these benefits.
The Work Capability Assessment is set to be scrapped in 2028, replaced by a single assessment based on PIP criteria. Under this new system, payments for new incapacity claimants will be drastically reduced, dropping from £97 to £50 per week. Existing claimants will have their payments frozen until 2030.
In defending these reforms, the Chancellor emphasised the importance of creating a sustainable welfare system, stating: “We are reforming our welfare system, making it more sustainable, protecting the most vulnerable, and supporting more people back into work.
“The Labour party is the party of work. We believe that if you can work, you should work – and if you can’t, you should be properly supported.”
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