Rachel Reeves’s Spring Statement bombshells and the way they’re going to have an effect on you

Chancellor Rachel Reeves has used her Spring Statement to unveil swathes of public spending cuts – including benefits being slashed for some of Britain’s most vulnerable

Rachel Reeves has used her Spring Statement to unveil swathes of public spending cuts – including benefits being slashed even further for some of Britain’s most vulnerable.

The Chancellor confirmed there would be no tax changes in the major financial announcement, meaning she was forced to balance the books in other ways. Gloomy forecasts and slow economic growth meant she had to expand her already announced cuts to benefits.

She also announced a reduced uplift in day-to-day government spending – meaning cuts for some unprotected government departments – and a downgraded economic growth forecast for this year.

In a major Spring Statement announcement to the Commons, the Chancellor said the world is “changing before our eyes” and that there is a need for an “active government” to respond to global events. She explained to MPs that escalating threats across the continent were “evolving rapidly” as she laid the ground for tough decisions in order to boost defence and security.

READ MORE: Chancellor Rachel Reeves announces new benefit cuts in Spring Statement blow

In some good news, her planning reforms will create a “permanent” increase to GDP. Furthermore, while the Office for Budget Responsibility downgraded growth forecasts for this year, it increased its estimates for all its subsequent yearly forecasts. And the spending watchdog also predicted that real household disposable income would grow faster than it had expected last October. Ms Reeves said: “People will be on average £500 a year better off under this Labour government.”

But the revised forecasts, nor Ms Reeves’ explanations of “increased global insecurity”, will provide little comfort to vulnerable and disabled people across the country who face fresh cuts. The Chancellor has faced loud pushback in the last week – including from Labour MPs – who say the Treasury should instead raise taxes for Britain’s ultra-wealthy instead of targeting the poorest in society.

Here’s Ms Reeves’s Spring Statement – at a glance.

1. Benefits cuts

A headline announcement from Ms Reeves’s Spring Statement is her devastating cuts to benefits. Official estimates show her cuts will push over 250,000 people – including 50,000 children – into relative poverty. The grim conclusion comes in the Department for Work and Pension’s own impact analysis – published just minutes after Ms Reeves delivered the Spring Statement. It shows up to 3.2million families could lose out as a result of the overall reforms.

In her statement, Ms Reeves announced fresh benefit cuts after the spending watchdog said her reforms would save less than planned. It follows last week’s controversial decision to slash £5billion from sickness and disability benefits – with major changes to Personal Independence Payments (PIP).

Under the new measures unveiled by the Chancellor, Universal Credit incapacity benefits for new claimants will now be frozen until 2030 rather than increased in line with inflation. It is on top of measures announced last week to cut the payment by 50% for new claimants.

Elsewhere, the universal credit standard allowance will increase from £92 per week in 2025-26, to £106 per week by 2029-30. It had previously been expected to rise to £107 per week by that year.

The OBR found that steps to cut welfare spending would save £4.8billion after “final adjustments” made by the Government. This is slightly short of the £5billion originally envisaged by ministers, and came after the Chancellor confirmed her original cost-cutting plans would have saved just £3.4billion.

2. Economic growth verdict

In miserable news for the Chancellor, the UK’s economic growth forecast for this year has been slashed to just 1% by the Office for Budget Responsibility. The government’s tax and spending watchdog also predicted that inflation will average 3.2% this year – but peaking at 3.7% – then fall to 2.1% in 2026, then back to Bank of England’s 2% target from 2027 through to 2030.

However, there was good news for Ms Reeves, for the next year and beyond. While the OBR has halved its economic forecast for 2025, it upped its estimates for next year onwards, predicting it would expand by 1.9% in 2026, then 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029.

Ms Reeves also revealed that the OBR – whose task is to check the Chancellor’s plans to ensure the sums add up, and whose verdict is highly scrutinised by financial markets – predicted that real household disposable income would grow faster than it had expected last October. Ms Reeves said: “People will be on average £500 a year better off under this Labour government.”

3. Spending cuts

Addressing MPs in the Commons, Ms Reeves also announced that spending across government will not increase as much as expected – meaning cuts for departments with unprotected budgets.

She said overall day to day spending will be cut by £6.1billion from what was previously planned by 2029/30. She said day-to-day spending will rise by 1.2% above inflation each year, not 1.3% as previously planned.

Departments like the Ministry of Justice – which is facing a major crisis in its prisons and courts – and the Home Office – which is trying to fix a spiralling immigration situation and depleted police forces – will now face effective cuts in what they had previously expected their budgets to be.

Ms Reeves defended her plan, explaining that day-to-day spending by the Government will still “increase in real terms, above inflation, in every single year of the forecast”, adding: “In the spending review period, apart from the reduction in overseas aid, day-to-day spending across government has been fully protected.”

She said capital spending would not face cuts and would be increased by “an average of £2billion per year compared to the autumn to drive growth in our economy and deliver in full our vital commitments on defence”.

4. Planning reforms win

In a moment of brightness among the gloom – Rachel Reeves revealed the OBR had forecast the government’s planning changes would give a huge boost to the economy.The reforms alone will “help build over 1.3 million homes” in the next five years, she said – putting them in “touching distance” of delivering on their manifesto promise of 1.5 million by 2029. (Not actually achieving it…but within touching distance of it).But the OBR, she said, are impressed with the changes – saying they will cause a “permanent” increase to GDP. She told MPs: “We published changes to the National Planning Policy Framework, driven forward tirelessly by the Deputy Prime Minister [Angela Rayner], reintroducing mandatory housing targets and bringing ‘grey belt’ land into scope for development.

“The OBR have today concluded that these reforms will permanently increase the level of real GDP by 0.2% by 2029-30, an additional £6.8bn in our economy and by 0.4% of GDP within the next 10 years an additional £15.1bn in our economy.“That is the biggest positive growth impact that the OBR have ever reflected in their forecast, for a policy with no fiscal cost. And taken together with our plans to increase capital spending this Government’s policies will increase the level of real GDP by 0.6% in the next 10 years.”

5. Defence spending rise – but aid cut

Ms Reeves has allocated an additional £2.2billion to the Ministry of Defence’s budget for next year. It is a further down payment on the government’s plans to deliver 2.5% of GDP by 2027. “This additional investment is not just about increasing our national security, but increasing our economic security, too,” the Chancellor said.

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.”

The commitment is fully funded, with cash coming from Treasury reserves and also from the decision to slash foreign aid funding. The PM set out in February his plans to increase defence spending by slashing the foreign aid budget from 0.5% of GDP to 0.3% in 2027 – the lowest level since 1999.

6. Civil service cuts

Ms Reeves also set out plans to make the state “leaner and more agile” by slashing the costs of running government. She said this will come from making the civil service and government bodies are more productive – and builds on the announcement to abolish the arm’s-length body NHS England.

The Chancellor said Cabinet Office minister Pat McFadden will “significantly reduce the costs” of government by 15% – worth £2billion by the end of the decade. And she said Health Secretary Wes Streeting “is driving forward vital reforms to increase NHS productivity, bearing down on costly agency spend to save money we can improve patient care”.

She announced £3.25billion of investment in a new transformation fund to make public services more “more efficient” and “more productive”, saying: “This work shows that we can make our state leaner, and more agile, delivering more resources to the front line while ensuring we control day-to-day spending to meet our fiscal rules. Today, I build on that work by bringing forward £3.25 billion of investment to deliver the reforms that our public services need through a new Transformation Fund.”

The Chancellor also announced steps to crack down on tax evasion, which she said would raise “£6.5billion per year” for the public purse.

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