26TH | MARCH | 2025
Economy
- The Office for Budget Responsibility (OBR) has halved the UK growth forecast for 2025 from 2% to 1%.
- Mrs Reeves says that today’s announcements mean that the government’s budget will move from a deficit of £36.1bn in 2025/26 and £13.4bn in 2026/27, to a surplus of £6bn in 2027/28, £7.1bn in 2028/29 and £9.9bn in 2029/30.
- The OBR forecast shows that the investment rule is also met two years early, with net financial debt of 82.9% of GDP in 2025-26 and 83.5% in 2026-27, before falling from 83.4% in 2027-28, to 83.2% in 2028-29 and 82.7% in 2029-30.
- Real household disposable income per person is expected to grow by an average of around 0.5 percentage points a year from 2025-26 to 2029-30. This means that households will be on average over £500 a year better off.
Welfare
- The universal credit health element will be cut by 50% and frozen for new claimants.
- The universal credit standard allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30.
- An investment of £1bn to provide guaranteed, personalised employment support to help people back into work.
- £400m to support the Department for Work and Pensions and Job Centres to deliver these changes effectively and fairly.
Government spending
- Defence spending will be increased to 2.5% of GDP.
- Overseas aid will be reduced to 0.3% of gross national income.
- £3.25bn of investment to deliver the reforms that public services need through a new Transformation Fund.
- The first allocations from this Transformation Fund will include:
- Funding for voluntary exit schemes to reduce the size of the civil service.
- Pioneering AI tools to modernise the state.
- Investment in top technology for the Ministry of Justice to deliver probation services more effectively.
- An upfront investment to support more children in foster care.
- The Chancellor said these steps will help to deliver a further £3.5bn of day-to-day savings by 2029/30. Overall, day-to-day spending will be reduced by £6.1bn in 2029/30.
- Capital spending to be increased by an average of £2bn per year.
- The OBR forecast that CPI inflation will average 3.2% this year before falling rapidly to 2.1% in 2026 and meeting the 2% target from 2027 onwards.
- A voluntary redundancy scheme is set to launch for civil servants, saying this will deliver £3.5bn in day-to-day savings by 2029-30.
- Government spending will now grow by an average of 1.2% a year above inflation, compared with 1.3% in the autumn.
Ministry of Defence
- An additional £2.2bn for the Ministry of Defence next year.
- UK will spend a minimum of 10% of the Ministry of Defence equipment budget on new novel technologies, including drones and AI-enabled technology.
- The Chancellor said that they will establish a protected budget of £400m within the Ministry of Defence, a budget that will rise over time for UK defence innovation, with a clear mandate to bring innovative technology to the frontline at speed.
- £200m supporting the creation of thousands of jobs in Barrow.
- Regeneration of Portsmouth Naval Base, securing its future as well as securing better homes for thousands of military families.
- £2bn of increased capacity for UK export finance to provide loans for overseas buyers of UK defence goods and services.
- Establish a new “Defence Growth Board” to maximise the benefits from every pound of taxpayers’ money spent.
Housing
- The housing reforms will permanently increase the level of real GDP by 0.2% by 2029–30, an additional £6.8bn for our economy and by 0.4% of GDP within 10 years, an additional £15.1bn in the British economy.
- The OBR have concluded that the reforms will lead to house building reaching a 40-year high. This equates to around 305,000 new homes a year by the end of the forecast.
- Changes to the national planning policy framework will help to build over 1.3 million homes in the UK over the next 5 years.
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