Chancellor Rachel Reeves has delivered her Spring Statement, outlining the Government’s plans regarding taxation, the welfare system and benefits, as well as forecasts for inflation and economic growth.
No tax increases
It was widely expected that the Spring Statement would contain no tax rises, and the Chancellor confirmed that in her speech.
Ms Reeves also pledged a crackdown on tax evasion. The Treasury is due to announce plans to “increase the number of tax fraudsters charged each year by 20%”. This is expected to increase the total revenue raised from tackling tax evasion to £7.5 billion.
Welfare and benefit cuts
A lot of the discussion about public finances ahead of the Spring Statement revolved around benefits and the welfare system.
The Government had already announced a shake-up that included stricter tests for personal independence payments, which are paid to people who have difficulty completing everyday tasks due to long-term physical or mental health conditions.
These benefit payments aren’t means-tested and are available to working people.
In the Spring Statement, the Chancellor confirmed extra measures intended to deliver additional welfare savings. She announced that the health element of Universal Credit will be cut by 50% for new claimants from April 2026 and then frozen.
Options for ISA reforms
The Government revealed that it is “looking at options” for reforms to ISAs, with a focus on finding the right balance between cash and equities to deliver better returns for savers.
It is also working with the Financial Conduct Authority to develop a system of “targeted support” that gives people more confidence to invest their money.
Inflation and the economy
Inflation has been a big concern for many working people in recent years, having peaked at a 41-year high of 11.1% in October 2022.
It’s currently at 2.8% and is expected to average 3.2% this year, according to the Office for Budget Responsibility (OBR), up from its previous forecast of 2.6%.
The OBR predicted that inflation would drop back to 2.1% in 2026 and then 2% – the Government’s target level – in 2027.
Ms Reeves also highlighted the OBR’s projection that real disposable income will increase at almost twice the rate anticipated in the autumn. She said this will make households “on average over £500 a year better off”, even when inflation is taken into account.
As far as the economy is concerned, growth forecasts have been downgraded from 2% to 1% this year. The OBR is predicting that GDP will then rise by 1.9% next year and 1.8% in 2027.
Departmental budgets
The Government is due to conclude a spending review in June that will outline its planned public sector reforms, potentially impacting funding for the Police and other services.
In its response to the Spring Statement, the Institute for Government (IfG) said there had been concerns that the weaker economic forecast would lead to larger-than-expected cuts for “unprotected” departments in the spending review.
However, the IfG noted the Government had “more or less maintained” the implied budget cuts of around 1% per year in real terms for departments including the Home Office. We’ll be keeping an eye on any developments in regard to Police pay.
Meanwhile, household costs are changing…
Separate to the policies announced in the Spring Statement, ordinary households and working people are currently preparing for a range of financial changes that take effect from April 2025, including:
- Rising utility bills
- Higher rates of council tax
- Lower stamp duty thresholds, meaning more people will have to pay stamp duty when buying a home
If you’re keen to improve your financial situation and understand various tax-free savings options, you might benefit from attending one of our webinars.
These events focus on topics such as:
- Understanding the Police Pension
- Preparing for retirement
- Maximising your tax-free savings
- Saving for your first home
Book your place now to find out what you can do to improve your financial future.
