What to expect from the 2025 Spring Statement

Next week, the UK Chancellor will deliver her Spring Statement. Chancellor Rachel Reeves had previously committed that we’d only see one major fiscal event per year, the Autumn budget, in theory to make it easier for households and businesses to plan. 

So we shouldn’t expect to see any new tax changes. But we will see a new set of macroeconomic estimates from the independent Office of Budgetary Responsibility – and those estimates are likely to garner a lot of attention. 

In one sense, the outcome is already pretty well-flagged. The OBR is almost certain to reduce its estimates for economic growth, in part because of uncertainty around trade tariffs. 

We’ve already seen the US Federal Reserve do something similar this week – cutting its published estimates for 2025 US GDP growth from 2.1% to 1.7%, while raising its estimates for inflation. That will create some challenges for the Chancellor. 

The Treasury is currently operating under two primary fiscal rules. The first is that day-to-day spending should be in line with revenues by 2029/30. The second is that public debt as a percentage of the overall economy should be declining by 2029/30 compared to 2028/29. 

The OBR will presumably give an opinion on whether these rules are likely to be met – and that probably explains some of the cuts to welfare spending that have been announced over the past couple of weeks.

It’s tempting to ask if these rules really matter. What will happen if the government misses them? In theory, the rules are there to provide credibility to the people and institutions who finance the government. A lot of the time, that’s a bit theoretical – does it really matter if you’re running a slight deficit or a slight surplus? Probably not. But the Liz Truss experience reminds us that when those institutions don’t have a lot of faith, the cost of the finance they provide goes up, potentially quite quickly. 

So, where does this leave us? The OBR will provide a downbeat set of forecasts next week, but that’s pretty well understood.

On spending, the Chancellor and the Prime Minister have signalled their willingness to make some tough spending choices, and that will probably make for some uncomfortable discussions in the cabinet.

We might also see the government try to carve out certain categories – defining some current spending as investment for instance.

Some have argued for the rules to be changed – it might make sense, but it’s always easier to make those changes from a position of strength.

All this also raises the probability of further tax increases in the Autumn budget, even if the Chancellor largely avoids that topic next week. 

What does it mean for investors? From an investment perspective, we think that the prospect of weaker growth and potential cuts to spending have been well-flagged. We think the Chancellor will try hard not to provide any major surprises. 

From the viewpoint of UK savers, we think that changes to taxes, if they come at all, are more likely to arrive in the Autumn. It’s something that we’ll continue to monitor closely.

In the meantime, we think it continues to make even more sense to take advantage of the tax-free allowances the government provides – notably via ISAs and SIPPs.