Fiscal fine tuning to balance the books. The headlines from today’s Spring Statement.
Rachel Reeves has delivered her Spring Statement today. We were not expecting personal tax rises, but further welfare cuts and Government spending cuts were possible.
In fact, the Spring Statement was more of an opportunity to restate the Government’s priorities and to allow the Office for Budget Responsibility (OBR) to “score” the Government’s plans for future growth.
The bad news for the Government was that the OBR downgraded growth from 2% to 1% for 2025.
The good news was that it upgraded it for the following three years.
The OBR went on to confirm that the current £36.1bn deficit in “fiscal headroom” is expected to be restored to a £9.9bn surplus by 2029-30. Fiscal headroom is the amount a Government can increase spending or cut taxes without breaking its own fiscal rules.
The headlines from the Spring Statement were:
- No further tax increases in the statement
- Day to day public spending to be cut by £6.1bn by 2029-30
- Further cuts to Universal Credit saving £4.8bn
- Additional £2bn of defence spending, largely funded from cutting international aid
- Increase capital investment by a further £2bn
- An additional £2bn for affordable homes, reinforcing the focus on planning reform and housebuilding as a key driver of economic growth. The OBR confirm that they believe the Government’s plans can deliver 1.3m homes by the end of the Parliament
- £600m to train the construction workers necessary for homebuilding plans
The Government’s plans for growth rely heavily on building more homes, and the OBR seems to believe that building 1.3m homes over the next 3 to 5 years is plausible.
We will be considering the detailed policies refinements announced during the Spring Statement and published in the supporting documents over the coming days.
