Chancellor Rachel Reeves today delivered her Spring Statement. Unlike the Autumn Budget, which is used to announce areas of investment and indicates the government's policy commitments and priorities, the Spring Statement was always billed to be far more functional and provided a functional update on progress so far.
The Chancellor reiterated her plan to bring
- Stability to our public finances
- Investment in infrastructure
- and reform to Britiain's economy through growth, trade and building capacity in the economy.
Accompanying the Chancellor's speech is a series of reports from the Office of Budgetary Responsibility (OBR). The full document can be found here and all of the OBR’s updated economic and fiscal outlook here.
An updated summary of headlines is below. We will also be discussing the Spring Statement at our next CEO Breakfast Meeting on the 6 March 2026.
General...
- The Chancellor said average growth across the forecast period was largely unchanged, and the OBR had adjusted the profile of GDP so that it grew slower in 2026 and faster in 2027 and 2028.
- The OBR now forecasts that GDP growth will be 1.1% this year, before rising to 1.6% in each of 2027 and 2028, and 1.5% in 2029 and 2030. GDP per capita will rise by 5.6% over the course of this Parliament.
- Unemployment is set to peak later this year and fall in every year of the forecast period, ending the forecast period at 4.1%, lower than what it was at the start of the Parliament
- In relation to the fiscal rules, the OBR had found that the UK was set to reduce borrowing and it was set to borrow less than the G7 average.
- Public sector borrowing is now set to fall from 4.3% this year to 3.6% next year, down to 1.9% in 2029/30.
- Headroom against the stability rule in 2029/30 has increased from £21.7 billion to £23.6 billion, even after the SEND reforms introduced last week, with headroom against the investment rule at £27.1 billion.
- The Government is supporting increased defence spending, which the Chancellor argued is important in light of the evolving situation in the Middle East.
- The fiscal context for the next Budget will remain challenging.
On Health, Social Care and Welfare...
- The OBR highlighted the risk of further industrial action across the NHS as a 'significant risk' to departmental spending plans within this spending review period.
- Rising demand for statutory services such as temporary asccomodation, asylum accomodation, adult and children's social care continues to present a 'significnt risk to local authority finances.
- Housing services and social care for both adults and children now make up around 30% of local authority service expenditure in England, compared to around 20% in 2015/16.
- A number of risks relating to welfare spending were flagged including pressures on the tax-to-GDP ratio in areas such as defence, education and welfare, the impact of the unemployment peak increasing working-age welfare spending and the impact of future costs of welfare spending following the 'sharp growth of disability and health caseloads since the pandemic'.
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The OBR projects that incapacity benefits caseloads will grow by 1.3%, down from the 3% expected over the next three years and the 7% annual average seen since the pandemic. However these projections are “highly uncertain”.
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Overall welfare spending is forecast to rise by £18 billion this year (5.8%), before easing to annual increases of £15 billion (4.1%) over the remainder of the forecast period (p.69). This trajectory reflects rising pensioner and health-related benefit spending, partly offset by the scheduled increase in the state pension age between 2026 and 2028. The OBR also outlined alternative scenarios in which benefit spending could rise significantly if persistent unemployment takes hold.
- While overall borrowing was revised down, policies relating to SEND costs are expected to increase - on average costing the government an additional £4bn per year.
- Department of Education spending is set to increase by £4.2bn per year in the final three years of the forecasting, reflecting the uncosted decision to absorb SEND deficits from local authorities into the Department's overall budget. According to the OBR, the impact of SEND reforms on spiraling costs 'remains uncertain'.