The Chancellor Rachel Reeves promised that everyone will be a thousand pounds a year better off as she delivered her Spring Statement
Delivered with the spectre of war in the Middle East Reeves said that
‘It is incumbent on me and this government to chart a course through that uncertainty. To secure the country against shocks. To protect families’
The Spring Forecast today is a particularly surreal event given the OBR’s figures all predate the events of this weekend in the Middle East
Everything is changing – expectations on interest rates, government borrowing, gas prices
Much depends on how long the conflict lasts, but there is a real possibility that the OBR’s forecasts are historic – in the literal sense – even before they have been published
This year’s growth forecast has been cut from 1.4% to 1.1%, but Reeves said that GDP will grow “faster in 2027 and 2028”
“My plan is the right one. I am in no doubt about how great the rewards can be if we stay the course. The forecasts confirm the choices I’ve made are the right ones”
Rachel Reeves, said that she was confident that the government would beat the current economic forecasts, highlighting trade deals and investment in infrastructure.
This is not a Spring Statement, it is a surrender statement.’ said the Shadow Chancellor Mel Stride
He compared Rachel Reeves to a ‘dodgy estate agent standing in a crumbling building, with a roof gone, windows gone, floor gone saying “just think of the potential”.’
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The OBR is forecasting that unemployment will peak at 5.33% in 2026 before falling gradually over the course of the rest of this Parliament
Wage growth is also forecast to slow to around 3.5% in 2026 then 2.25 per cent a year, reflecting the impact of lower inflation and the ‘gradual pass-through of more of last year’s rise in employer National Insurance contributions
Taxes are poised to hit a post-war high of 38% of GDP in 2030-31, the OBR says
Living standards will stagnate as taxes ‘drag on disposable incomes’
‘A higher level of the tax take increases the risk that incentives within the tax system distort or constrain economic activity by more than expected.
‘The yield from the personal tax threshold freezes across the forecast is very sensitive to future inflation and nominal earnings growth
‘And there are also risks that the tax gap, which is a measure of the degree of tax compliance, does not fall by as much as forecast’
Falling levels of migration have more than offset improved productivity growth, the OBR says
‘The impact of this on potential output is more than offset by lower labour supply growth due to lower net inward migration across the forecast.
‘This reflects an assumption that net outflows by British national adults will be around 50,000 a year higher on average, following recent revisions to ONS outturn.
Despite the Chancellor seeking to strike a robust tone regarding the impact of the Government’s economic agenda, ultimately the pace of progress remains slow says Ben Harrison, Director of the Work Foundation at Lancaster University
“The OBR’s forecasts underline that 2026 is likely to continue to be highly challenging – particularly for workers struggling with the cost of living crisis and for young people struggling to find a secure job.
“The growth forecast for 2026 has been revised down to 1.1%, with the OBR suggesting that unemployment has yet to peak and inflation will only return to target by the end of the year. However, these forecasts could be further impacted by the potential impact of escalating war in the Middle East.
“At a time when nearly nine in ten people state the cost-of-living continues to be a major issue facing them and the UK economy, it’s critical that the Government seeks to go further and faster in driving wider economic growth during a period of international uncertainty.
“The Chancellor promised further announcements to tackle stubbornly high levels of youth unemployment. As part of this, it’s critical that she strengthens the Government’s Youth Guarantee. Eligibility should be expanded to include 22-24 year olds, and the scheme should kick in long before young people have been out of work for 18 months, as is currently proposed. Most importantly, the scheme must deliver employment placements that offer secure, well-paid jobs, and provide a platform for young people to progress further in their working lives.”
