Rachel Reeves and the 2025 spring statement - Four key questions for the chancellor

26th March 2025

How will the spring statement shape the chancellor's spending choices?.

How has the OBR revised its outlook for the economy?
Alongside the spring statement, the government will publish an updated assessment of the UK economy from the Office for Budget Responsibility (OBR) - and the OBR is likely to present a gloomier picture than in October. Since the government's last budget in autumn 2024, the outlook for the UK economy from most forecasters has worsened - possibly even to the extent that the OBR judges that the chancellor is not on track to meet her fiscal rules.

What is the outlook for living standards?
The government's Plan for Change pledged that household living standards - as measured by real household disposable income - would rise across the country.

The last forecast from the Office for Budget Responsibility (OBR), however, showed sluggish growth in living standards. Over the next five years, average real household disposable income per person was forecast to grow by just half a percent a year on average. This compared to an average of around 1% a year growth in the decade before the pandemic (and the average of around 2.5% a year enjoyed over the decade before the 2007/08 financial crisis).

How far will Rachel Reeves prioritise meeting her fiscal rules?
At the autumn budget, Rachel Reeves committed to hold only one fiscal event per year, with a forecast ‘update' in the spring. But she left herself only around £10 billion of headroom against her ‘ironclad' fiscal rules, less than the average OBR forecast revision of around £15 billion.

What could the spring statement tell us about the upcoming spending review?
The government's first first multi-year spending review, due to be published in June, will set out departmental budgets between 2026/27 and 2028/29.

The spending plans set out in the October budget beyond 2025/26 were tight. Our analysis showed that - following a large increase in spending in 2025/26 – funding for unprotected departments was due to fall in real terms between 2025/26 and 2029/30. We estimated that would mean that funding for police, criminal courts and prisons would fall by 1.3% per year in real terms in those years. Funding for local government would increase, but only by 1.2% in real terms per year, driven almost entirely by rising levels of council tax. Most of that increase will be swallowed by rising demographic pressure.

Read the full answers at the Institute for Government