Rachel Reeves has insisted she has the “right economic plan” for the country despite the budget watchdog slashing its growth forecast for the year and growing fears over the impact of the war in the Middle East.
After promising to only have one major fiscal event each year – taking the form of the autumn budget – Ms Reeves’ spring statement was devoid of any tax and spending changes.
Instead, she provided a broad update on the nation’s finances in the face of mounting global instability.
Here, The Independent looks at everything we learnt and what it means for you.
Energy prices
The chancellor said she would meet North Sea industry leaders on Wednesday to discuss gas and oil prices, which were sent soaring by Iran’s threats to a crucial shipping route.
It came as the Office for Budget Responsibility (OBR) warned that the conflict in the Middle East, which “escalated” as the experts finalised their projections, “could have very significant impacts on the global and UK economies”.
When it comes to the global economy, these risks are “particularly (in) energy markets”, they add.
The OBR’s official report, published alongside the spring statement, warns that “the geopolitical situation and global trade policy remain highly volatile”.
The chancellor’s planned meeting with North Sea bosses will prompt speculation that their tax burden could be under consideration, amid heavy lobbying from the sector to axe the windfall tax.
Currently set at 38 per cent, the levy was introduced under the previous government in May 2022 after profits rocketed due to a spike in energy prices following Russia’s invasion of Ukraine.
The government has announced a consultation on plans to replace the tax, due to end in 2030, with a new regime aiming to provide more certainty for the sector, while protecting consumers against future shocks.
Experts say UK homes are unlikely to see any immediate impact on energy bills as a result of the escalating crisis. Gas wholesale prices affect the energy price cap set by regulator Ofgem in the UK and these global events will be factored into the next cap – but that only takes effect from July.
Growth forecasts
UK growth has been downgraded for this year, with the OBR indicating that gross domestic product will increase by 1.1 per cent in 2026, down from the 1.4 per cent it forecast in November.
But the watchdog upgraded its forecasts for 2027 and 2028 from 1.5 per cent to 1.6 per cent.
Ms Reeves told the Commons: “Last year, we demonstrated the resilience of Britain’s economy in the face of global headwinds, with the fastest growth of any G7 country in Europe.
“Today, the Office for Budget Responsibility has updated its growth forecasts, including reflecting lower net migration – average growth across the forecast period is largely unchanged, while the OBR has adjusted the profile of GDP so that it grows slightly slower in 2026, and faster in 2027 and 2028.”
She added: “By the next election, after accounting for inflation, people are forecast to be over £1,000 a year better off.”
Net migration
Net migration – representing the overall change in population as a result of migration – is set to fall, the OBR has said.
“We have lowered our central forecast for overall net inward migration by around 60,000 people (50,000 adults) a year on average. This is driven entirely by a more negative assumption for net migration by British nationals,” the forecaster said.
It comes after a number of policies, including an increase to the minimum earning threshold for overseas workers from £26,200 to £38,700, were unveiled to clamp down on people coming to the UK to cut net migration.
Employment
Unemployment will peak later this year and then fall in every year of the forecast period, ending the period at 4.1 per cent – lower than it was at the start of parliament, the chancellor said.
The OBR said the unemployment rate would hit 5.3 per cent this year, up from the 4.9 per cent forecast in November, with the rates in 2027 and 2028 also higher than expected in the autumn.
The watchdog said entrants into the labour force were “struggling to find work amid subdued hiring demand”.
Slower wage growth will also contribute to lower inflation forecasts, with the consumer prices index falling from 3.4 per cent in 2025 to 2.3 per cent this year and hitting the Bank of England’s two per cent target from 2027.
What wasn’t included?
Tax or spend policies
As a result of the chancellor’s promise to only have one major fiscal event each year at the autumn budget, today’s spring statement included no new tax cuts or spending measures.
Ms Reeves promised to press ahead with the government’s existing economic plan, insisting it is the right one and was “even more important” given the crisis.
She argued that it was “incumbent on me and on this government to chart a course through that uncertainty”.
Student loan changes
There has been growing criticism of the student loan system in recent weeks, with Labour MPs hitting out at “rip-off” interest rates and unfair changes to repayment terms.
It comes after the chancellor used her last budget to freeze the the salary threshold at which repayments kick in at £29,385 for three years, leading to many graduates having to pay more.
There was a growing expectation that there could be some changes to the student loan system at the spring statement after Sir Keir Starmer said he will look at ways to make the loans system fairer. But today’s statement included no such changes to the system.
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