UNW’s summary of the key announcements from the Spring Statement

The government is keen to have only one major fiscal (tax) event per year, the Autumn Budget, to give families and businesses stability, and so the Spring Statement was merely intended to provide an interim update on the economy and public finances, and comment on the latest forecast by the OBR (Office for Budget Responsibility), not make tax policy changes – a position welcomed by the respected IFS (“One major fiscal event per year is enough“).

The speech was highly political, with the Chancellor specifically referring to three particular areas which she considers show that the government’s policies are working:

Cutting the cost of living – the OBR’s forecast shows inflation, borrowing and debt interest are falling, whilst investment is rising.

Cutting borrowing – the OBR’s forecast shows borrowing is down by nearly £18 billion compared to the autumn, with borrowing this year set to be the lowest in six years and falling below the G7 average – but that’s still 4.3% of our GDP in 2025/26.

Growing the economy – the OBR’s forecast shows GDP per person is now set to grow more than was expected in the Budget, with growth of 5.6% over the parliament.

That was what the government said but what did the OBR have to say in its 125-page report? The start of the report stated that the fiscal context for the next Budget will remain challenging, so does this mean even more tax rises? It certainly does not appear likely that tax cuts are on the way anytime soon.

Highlights of the OBR’s report include:

• productivity growth will pick up to 1% in the medium term
• labour supply growth will decline, mainly due to lower net migration and population ageing
• GDP growth will slow down to 1.1% in 2026, before averaging 1.6% over the rest of the five-year forecast
• inflation will reach its 2% target in late 2026
• public sector net borrowing is projected to fall from 5.2 % of GDP in 2024/25 to 4.3% of GDP this year and then to 1.6% in 2030/31
• weekly wage growth will slow to around 3.5% in 2026 and then average 2.25%
• unemployment will rise from 4.75% in 2025 to a peak of 5.33% in 2026, primarily driven by new entrants into the labour market struggling to find work.

Of course, the Spring Forecast is exactly that; for example, the effects of the current situation in the Middle East have not been factored into any of the data released by the OBR. The OBR also makes some other important points:

• the tax-to-GDP ratio is forecast to increase to a post-war high of 38% of GDP in 2030/31
• there continue to be pressures on the government’s departmental spending plans
• there are concerns that the future costs of welfare spending may follow the sharp growth of disability and health caseloads since the pandemic.

While the Chancellor did meet her commitment not to make new significant tax announcements, many tax changes are already on the way, so the following commentary covers most of these, and summarises the key tax rates and bands for the next tax year.

 Download our Spring Statement Summary (PDF)

If you have any questions regarding the information covered in this summary, or would like advice on a particular area, please get in touch with either your usual contact or any of the UNW Tax partners. Contact details can be found on the final page of this summary PDF.