The Chancellor of the Exchequer presented her Spring Statement at lunchtime today. Here is a link to the full document. https://assets.publishing.service.gov.uk/media/67e3ecff55239fa04d411fc3/E03274109_HMT_Spring_Statement_Mar_25_Text_PRINT_.pdf
There are not any tax changes further to those already announced in the October Budget.
Here is a brief summary of the main announcements.
- A lot of political hyperbole and blaming the previous government for the current state.
- Fiscal rules “non-negotiable”.
- No new tax changes but a focus on tax avoidance. Plans announced will “increase the number of tax fraudsters charged each year by 20%”. Reeves says these changes will take the total revenue raised from reducing tax evasion to £7.5bn, which she says has been verified by the Office for Budget Responsibility (OBR).
- The Chancellor has announced that the key fiscal rule would have been missed by £4bn due to rises in government borrowing costs. Her measures reverse that and reinstate the room for manoeuvre at the Budget at £9.9bn. So, the total correction – or “repair job” – in this statement is about £14bn by the end of the Parliament in 2029/30.
- She then refers to the OBR statement today which estimates her package will save £4.8bn in the welfare budget. The Chancellor adds that the Universal Credit standard allowance will increase from £92 per week in the financial year 2025/26 to £106 per week by 2029/30 – while the Universal Credit health element will be “cut by 50% and then frozen for new claimants”.
- Reeves says welfare spending as share of GDP will fall between 2026-27. The total savings from the package will be £3.4bn, she says, citing a forecast from the OBR. Originally, the government said it would be £5bn.
- Defence spending will increase to 2.5% of GDP (an extra £2.2bn) by reducing overseas aid to 0.3% of gross national income.
- Reeves says she is bringing forward £3.25bn of investment to deliver reforms for public services in a new transformation fund. It will bring down the costs of running the government by the end of the forecasting period, she says. She says the first allocations from this fund will go to voluntary exit schemes to reduce the size of the civil service, pioneering AI tools, investment in technology for the ministry of justice for probation services and up-front investment to support children in foster care. Ultimately, this work will help deliver a further £3.5bn of day-to-day savings by 2029-30,
- OBR has slashed growth forecast for the coming year in half – from 2% to 1% (Bank of England says only 0.7%).
- Turning to the impact of uncertainty on the economy, Reeves says the government must work closely with the Bank of England. She says this means working with the independent Monetary Policy Committee “in their work to meet the 2% inflation target”. Having peaked at 11% under the previous government, Reeves suggests that inflation will hit its 2% target by 2027. She says this will give the economy “the stable platform it needs to grow”.
- Reeves claims that planning reforms will boost national income by 0.2% by 2029/30 – an additional £6.8bn in the economy “with no fiscal cost”.
Announcements not mentioned in the speech
- Advance tax certainty for major projects consultation. At Autumn Budget 2024, the government announced in its Corporate Tax Roadmap that it would be consulting on a new process to provide increased tax certainty in advance for major projects. The consultation seeks views on taxpayers’ priorities and sets out thinking on how a new process could work to support investment decisions. https://www.gov.uk/government/consultations/advance-tax-certainty-for-major-projects-consultation
- The government is consulting on a potential advance clearance procedure for Research and Development tax relief with the aim of providing greater certainty for businesses planning to invest, while reducing error and fraud. https://www.gov.uk/government/consultations/research-and-development-tax-relief-advance-clearances
