On March 26, 2025, Chancellor Rachel Reeves delivered the UK's Spring Statement, outlining several significant fiscal measures and economic forecasts.

Economic Growth Forecasts

The Office for Budget Responsibility (OBR) has revised the UK's 2025 growth forecast down to 1%, highlighting challenges in achieving robust economic expansion. 

Welfare Spending Reforms

To meet fiscal targets, the government plans substantial cuts to welfare spending, totaling £8.3 billion annually. These reductions are expected to impact benefits for sick and disabled individuals, potentially reducing disposable income for lower-income households by an average of £500 over the next five years.

Increased Defence Expenditure

The Chancellor announced a commitment to raise defence spending to 2.5% of GDP by April 2027, marking the most significant increase since the end of the Cold War. Future plans aim for defence spending to reach 3% of GDP in the next parliament. 

Public Sector Reforms

The government intends to reduce the civil service workforce by 10,000 positions, aiming to cut departmental spending by £2 billion. These measures are part of broader efforts to streamline public services and reallocate resources. 

Tax Compliance Measures

Starting April 6, 2025, HMRC will implement stricter late payment penalties for VAT and self-assessed income tax. The new rates are:​

• 15 days overdue: 3% of the tax owed.​
• 30 days overdue: An additional 3%, totaling 6%.​
• 31 days or more overdue: An extra 10% per annum, increasing the total penalty to 16%. 

Political Reactions

The Spring Statement has elicited mixed reactions. Opposition figures accuse the government of economic mismanagement, suggesting that the recent policies may lead to increased unemployment and inflation. There is also concern among Labour MPs regarding cuts to disability benefits and potential austerity measures. ​

In summary, the Spring Statement introduces significant fiscal reforms aimed at reducing public spending and increasing defence investment. However, these measures come with potential social implications, particularly for lower-income and vulnerable populations.

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