Chancellor Rachel Reeves delivered her spring statement today, unveiling a £14 billion package of cuts and new investments aimed at restoring the UK’s fiscal credibility and boosting long-term productivity.
Against a backdrop of weak growth and rising debt, Reeves outlined measures to rein in public spending, drive efficiency across government departments and invest in critical areas such as defence, housing and AI.
Here are the key highlights from today’s statement.
Fiscal outlook and debt forecast
The Office for Budget Responsibility (OBR) now forecasts a deficit of £36.1 billion in 2025-26, falling to £13.4 billion the following year and returning to a surplus of £9.9 billion by 2029-30. Reeves confirmed that her new package of cuts has restored the government’s fiscal headroom to the same £9.9 billion reported last autumn.
Welfare reform and universal credit
A series of welfare changes are at the heart of the chancellor’s cost-saving drive. The universal credit standard allowance will rise gradually, from £92 per week in 2025-26 to £106 by 2029-30. However, the health element of universal credit will be halved and frozen for new claimants. Reeves also committed £1 billion to getting more people back into work, with an additional £400 million in funding allocated to the Department for Work and Pensions. Overall, these measures are expected to save £3.4 billion.
Tax fraud crackdown
The government will invest further in HMRC to strengthen its enforcement capabilities. The aim is to boost the number of tax fraud prosecutions by 20 per cent annually, raising an additional £1 billion by targeting tax avoidance and fraud more effectively.
Defence and technology investment
A key pillar of today’s statement was a £2.2 billion boost to defence spending, with funds earmarked for new technologies, including air defence lasers for Royal Navy vessels. Reeves reiterated her ambition to make the UK a “defence industrial superpower”, with a focus on creating high-skilled jobs and strengthening supply chains.
Civil service reform and AI transformation
The chancellor confirmed the creation of a £3.25 billion Whitehall “transformation fund” aimed at reducing inefficiency in the civil service. The funding will support early exits for underperforming staff and investment in AI to improve productivity across departments. The move forms part of a wider strategy to modernise the state and reduce the long-term cost of public service delivery.
Overseas aid reduced
In a controversial move, overseas aid will be cut to 0.3 per cent of gross national income, down from the current 0.5 per cent target, saving an estimated £2.6 billion by 2029-30.
Housing and planning reforms
The OBR expects changes to planning rules to deliver an economic boost of £6.8 billion over five years and support the construction of more than 1.3 million new homes. These reforms are designed to tackle the UK’s chronic housing shortage while driving regional economic growth.
Economic growth and inflation forecasts
The UK economy is now forecast to grow by 1 per cent this year, rising to 1.9 per cent in 2026 and 1.8 per cent the year after — slightly improved figures from previous estimates. Inflation is expected to average 3.2 per cent in 2025 before falling to 2.1 per cent in 2026, in line with the Bank of England’s long-term targets.
As Reeves seeks to balance short-term fiscal discipline with long-term investment, today’s statement underlines a shift towards AI-led reform, defence innovation, and targeted infrastructure growth — signalling opportunities, as well as challenges, for UK businesses in the year ahead.
