What Is the Spring Statement?

On March 26, 2024, Chancellor Rachel Reeves will deliver an update on the UK economy alongside a forecast from the Office for Budget Responsibility (OBR). The OBR will assess the cost of living, government spending, and borrowing rules.

After her statement, the opposition—likely Kemi Badenoch or Mel Stride—will respond.

Will There Be Major Announcements?

Reeves has committed to making major policy changes only during the annual Budget, meaning no major tax hikes or spending increases will be announced on March 26.

However, speculation is growing over whether she will break her borrowing rules due to economic struggles and global financial pressures. The OBR is expected to confirm that the £9.9bn budget buffer has vanished.

Potential Spending Cuts and Tax Changes

The UK government is planning several billion pounds in spending cuts, with welfare programs and other departments likely affected.

Possible policy updates include:

• Lowering the £20,000 tax-free ISA limit to encourage investment in stocks and shares.
• Shifting international aid funds to defence, as the UK increases military spending.
• Extending the freeze on tax thresholds, which would lead to higher tax payments over time without changing tax rates.

How Is the UK Economy Performing?

The UK’s economy grew by just 0.1% in late 2024, indicating slow economic recovery. Businesses are struggling to expand, leading to fewer job opportunities and pay raises.

Inflation is at 3%, exceeding the Bank of England’s 2% target. If inflation rises, interest rates (currently 4.5%) may not decrease, keeping loans and mortgages expensive.

Starting in April 2024, businesses will face higher National Insurance costs, potentially leading to price increases for consumers.

What’s Next?

Reeves insists her borrowing rules are non-negotiable, but rising government debt and borrowing costs may force policy changes.

Additional spending cuts or tax adjustments could be announced in June’s Spending Review or the 2025 Budget. While the Spring Statement won’t bring major tax changes, it will shape expectations for future UK economic policies. 

Source: bbc.co.uk. ChatGPT