Understanding the 2025 Spring Budget: Key Highlights and Implications

Friday, 28th March, 2025

On March 26, 2025, Chancellor Rachel Reeves delivered the Spring Budget, outlining the government's fiscal policies and economic outlook. This mid-year update provides insights into the government's approach to public spending, welfare reforms, and economic growth projections.

Welfare and Public Service Reforms

The Chancellor announced significant cuts to welfare spending, aiming to achieve fiscal sustainability. These measures include:

• Universal Credit Adjustments: Restrictions on the health-related element of Universal Credit, particularly affecting individuals under 22.

• Personal Independence Payment (PIP) Eligibility: Reforms to PIP, impacting the support available to sick and disabled individuals.

• Civil Service Reduction: Plans to reduce the Civil Service workforce by 10,000 positions, reallocating funds to frontline services like policing.

These changes are projected to save the government £8.3 billion annually, with concerns that they may lead to increased poverty levels among lower-income households.

Increased Defence Spending

To bolster national security, the government has committed to significant increases in defence spending. Funding for defence will be partially sourced from cuts to the foreign aid budget. With a reduction o £2.8 billion in 2028/29. This reallocation has sparked debate regarding its impact on international development efforts.

Economic Growth Projections

The Office for Budget Responsibility (OBR) has revised the UK's economic growth forecast for 2025, now projecting growth at 1%, down from previous estimates. Contributing factors include higher energy and food prices, as well as persistently high wage growth, leading to inflation peaking at 3.7% in mid-2025 before returning to target levels.

Impact on Households

The Resolution Foundation estimates that lower-income households will experience a reduction in disposable income, averaging a £500 annual loss over the next five years. This projection raises concerns about the widening income gap and the potential to increase in relative poverty.

Looking Ahead

The Spring Statement sets the stage for the Autumn Budget, where more detailed fiscal policies, include potential tax adjustments, are expected to be unveiled. Chancellor Reeves has indicated that further measures will be introduced to simplify the tax and customs systems, with HMRC planning to establish additional details in the summer.

Conclusion

The 2025 Spring Statement reflects the government's efforts to balance fiscal responsibility with public service investment. While aiming for economic stability, the proposed cuts and spending reallocations have sparked discussions about their long-term social and economic impatcs. As more details emerge, businesses aand individuals alike should stay inormed to navigate the evolving landscape effectively.

Stay Informed with Pro Tax Plus Accountants

At Pro Tax Plus, we're committed to keeping our clients inormed abbout fiscal developments that may impact their financial planning. For personalised advice and insights tailored to your situation, contact us today.