The Prime Minister called it a spring statement. Conservatives called it the emergency budget. In fact, Rachel Reeves’ 33-minute statement to MPS had all the features of the holding tactics.
A central feature of the Prime Minister’s statement was his explanation of how to fill the £14 billion fiscal halls that have been opened since the October budget.
It was repair work done by mixing welfare cuts, reducing planned daily spending, cracking down on tax evasion, and a mix of electric shocks on civil servant efficiency.
However, the inevitable meaning from Reeves’ speech was that the main purpose of the Spring statement was to maintain the fiscal show on the road. The next six months are likely to present much larger economic and political tests.
“The world is changing. We can see and feel it,” Reeves told MP. She didn’t mention Donald Trump by name, but the US president overshadowed the prime minister’s speech.
Whether her promise was to fund the UK recontract programme or her warning that global trade patterns could be “more unstable,” the threat to the UK economy from the Trump presidency is clear.
The Budget Responsibility Office highlighted the fact that Reeves’ £9.9 billion shock absorption fund is highly vulnerable to balance current spending and tax revenue by 2029-30.
This said this is one-third of the average figure (£31.3 billion), according to a side dish set by the pre-2010 prime minister. If things don’t go well, Reeves will make a tough choice on his fall budget.
Former Deputy Tory Prime Minister Oliver Dowden told the Financial Times: “She has exhausted Labour’s desire to cut spending.
Many Labour lawmakers are already very nervous about the £3.4 billion of net welfare savings lined up by Reeves. The government impact assessment of the policy is partially filled with fear.
As a result of welfare reform, 150,000 people, including 50,000 children, have been pushed into relative poverty.
“It feels so harsh,” said the Veterans Labour MP. “You don’t see any big rebellion or anything like that, but people are falling to the ground.”
Party Whip may not be that optimistic given the welfare package will be eligible for House votes.
Cuts in daily sector spending have already been resisted by some Cabinet ministers and has been labelled “return to austerity” by the Conservative Party, long associated with the phrase. Even greater cuts have political prices.
Reeves hopes that the worst can be avoided and that the UK can seal off a swift trade deal with Trump to avoid the most punitive US tariffs. But the UK will be hit by the World Trade War like all other economies. What OBR warned might wipe out headroom that is expected to recover through Wednesday’s action.
Tory Shadow Chancellor Mel Stride said it was wise to incorporate more headroom into her latest financial plan, given the pressure Reeves has faced since her October budget.
She announced the cut on Wednesday to reestablish the same level of headroom with her updated plans, but he said: “She had that amount exactly and blew it away.
In a diagonal warning to the Prime Minister, Stride emphasized that if another financial repair job is due by the fall, Tories “help not consider raising taxes” if they are in charge of finances.
The economic degradation could force Reeves to return to higher tax issues. Just a year after she announced the £400 billion tax increase, of which £25 billion fell through high national insurance payments to employers.
There were other financial warning signs. The OBR suggested that mortgage rates would be 0.2 percentage points higher over the forecast period than expected in October.
Forecasters also estimated that 76% of NICS costs would be passed on to workers by “lowering actual wages.” Most surveys of business leaders said they pointed to a significant decline in nominal wages.
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Reeves’ statement included several bright spots that were given cheers from Labour MPs. OBR believes that planning reforms have boosted growth and reduced this year’s forecast to just 1%, but has raised Congress’s second half growth forecast to around 1.75%.
Reeves claims that the increase in defence spending, which increased to 2.5% of GDP in 2027, will support the UK’s defence and industrial renaissance. The OBR also welcomed the government’s plan to increase housing construction.
In the summer, Reeves will oversee the new industrial strategy and close out a “zero-based review” of all public spending. “This is a government that has the courage to step up,” she insisted.
However, the Prime Minister’s decision has been questioned in his preparation for the Spring Statement. Government officials have spoken about the “monastery” where the minister announced £5 billion of net welfare savings last week, but they simply say that OBR is willing to “scoring” £3.4 billion of savings.
It was then Reeves’ decision to accept “Freebie” tickets for the Sabrina Carpenter concert. The prime minister said it was security reasons, but admitted on Wednesday that he could see some people find it “strange.”
She needs to step in more surely in the coming period. The Spring Statement was a tough moment for Reeves, but there was a sense of drifting between Commons Chamber and MPS.
