The Lead Untangles: The Spring Statement
Civil service job losses, no tax rises and more - what the Chancellor Rachel Reeves announced and what it all means, Zoë Grünewald takes you inside the Spring Statement
At a glance facts
On Wednesday, the chancellor unveiled her latest Spring Statement - the second in Labour’s financial announcements since entering government.
In it came a fresh set of cuts to government spending and no tax raises, as the Rachel Reeves blamed a reduction in projected economic growth. The measures set out were:
Benefit cuts
Billions slashed from welfare, with £5bn estimated by the government and £3.4bn by the OBR.
Universal Credit’s health element halved for new claimants and frozen.
Standard allowance rises from £92 to £106 per week by 2029, slightly lower than the anticipated £107.
£1bn for job support and £400m for implementing welfare reforms.
Civil Service Job Losses
£2bn annual cuts to administrative budgets across government departments by 2030.
No official target, but 10,000 job losses expected, with reports suggesting up to 50,000.
Housing
£2bn pledged for 18,000 new social and affordable homes.
Labour is likely to miss its 1.5 million homes pledge, forecasting 1.3 million over five years.
Housebuilding to reach 305,000 homes annually by the decade's end.
Defence spending
£2.2bn extra for defence next year, aiming for 2.5 per cent GDP target.
The money will fund new technologies like laser weapons, as well as refurbishing military housing and upgrading Portsmouth naval base.
Construction Recruitment
£600m to train 60,000 workers (bricklayers, electricians, engineers, carpenters) over four years to fill 35,000 vacancies and support housebuilding.
Tax avoidance crackdown
£1bn expected to be recovered from stricter tax avoidance measures.
20 per cent increase in tax fraud prosecutions.
Departmental spending cuts
Day-to-day spending growth reduced from 1.3 per cent to 1.2 per cent above inflation.
Health, defence, and education budgets protected; full details of cuts will be revealed in June’s spending review.
Context:
The cuts come after the Office for Budget Responsibility (OBR) warned that welfare reforms would save £1bn less than the Department for Work and Pensions’ (DWP) forecast. The government is also facing further uncertainty, constrained by downgraded growth projections and concerns over potential tariffs from US President Donald Trump. Reeves’ decision to prioritize cuts over tax increases or relaxing fiscal rules has triggered backlash from Labour colleagues, who fear further harm to vulnerable constituents.
The government has firmly ruled out tax rises and relaxed borrowing rules, leaving little room to cover the financial shortfall. Despite this, just weeks earlier, extra funds were allocated to defence, responding to pressure from the US and concerns over shifting international alliances and looming foreign powers.
What opponents are saying:
There have been ample warnings from left-wing and anti-poverty thinktanks about the implications of the chancellor’s spending cuts. The Resolution Foundation has said that “poorer, disabled households are still set to take the biggest hit”, predicting that the poorer half of the country will see their incomes drop by around £500 over the next five years.
Paul Kissack, the chief executive of the Joseph Rowntree Foundation, has also accused the chancellor of “putting the burden of the changing world on the shoulders of those least able to bear the load”, adding: “The government needs to protect people from harm with the same zeal as it attempts to build its reputation for fiscal competence.”
Amongst its own MPs, Labour is braced for a backlash when the welfare reforms face a vote in May. Speculation is that as many as three dozen MPs could refuse to support the government, as well as some frontbench resignations. Several Labour backbenchers have spoken out against the cuts, including Clive Lewis, Connor Naismith, and Neil Duncan-Jordan. Rachael Maskell, the Labour MP for York Central, said: “The devastating impact of people losing essential income will fall on disabled people. I will not accept or vote for measures that will put people at risk or push deeper into poverty.”
There have also been criticisms from other parties. The Liberal Democrat welfare spokesman, Steve Darling, who is registered blind, called the cuts “incredibly insulting” and said the government “just doesn’t understand the challenges facing people with disabilities”, adding that they should “urgently fix social care”.
Mel Stride, the shadow chancellor for the Conservatives, accused ministers of having “reneged on their promises to the British people” in the election and said the country was “weaker and poorer” as a result of their actions.
What the government is saying:
The government have stood behind its spending cuts, explaining that it can not break its fiscal rules. Reeves has reminded MPs of the knock-on impact of Liz Truss’s unfunded spending splurge in 2022 that crashed the economy, warning that higher public spending could trigger a repeat incident.
The chancellor has also repeated the claim that the government will not raise taxes, citing manifesto commitments and the cost-of-living pressures on voters.
They have also negated figures that the poorest households will be £500 worse off by the next parliament, with Reeves telling MPs that households “will be on average £500 a year better off under this Labour government”, citing their legislative agenda including planning reforms, increased productivity and a larger housing stock having a positive impact on voter’s pockets.
Despite the government’s own analysis projecting that these further benefits cuts will push 250,000 people into poverty - including 50,000 children - Reeves has said she is “absolutely certain” it will not happen, explaining that assessment does not take into account the money people will receive from returning to work.
The government are hoping to concentrate on the positive headline figures behind the announcement. The OBR has assessed Labour’s planning reforms and estimates these will boost growth by 0.2 per cent over the five-year forecast period. It is also expecting the economy to be larger in five years’ time than it previously thought last October.
The chancellor sought to tie the uplift in defence spending to skilled job creation and the opportunities from new technologies.
What happens next:
The next months are crucial for the government. While MPs can expect growing public discontent as constituents voice concerns about benefit cuts, May will bring the first vote on the welfare proposals, which could trigger resignations and unrest within Labour. In June, further details on departmental spending cuts will emerge, likely causing further tensions amongst backbenchers and cabinet ministers.
More broadly, while the chancellor may have brought some wiggle room for the treasury this time round, financial uncertainty remains, with Donald Trump’s tariffs potentially complicating the government's fiscal outlook. While the government insists it won’t relax fiscal rules or raise taxes, history suggests further surprises may be ahead.
About The Lead Untangles: In an era where misinformation is actively and deliberately used by elected politicians and where advocates and opposers of beliefs state their point of view as fact, sometimes the most useful tool reporters have is to help readers make sense of the world.
The Lead Untangles is delivered each Friday (bonus, it’s out on a Thursday this week!) by The Lead and focuses on a different complex, divisive issue with each edition.
About the author: Zoë Grünewald is Westminster Editor at The Lead and a freelance political journalist and broadcaster. She has worked in and around Westminster for five years, starting her career as a parliamentary clerk before throwing away the wig and entering journalism. Zoë then worked as a policy and politics reporter at the New Statesman, before joining the Independent as a political correspondent. When not writing about politics and policy, she is a regular commentator on TV and radio and a panellist on the Oh God What Now podcast.
You can see more of Zoe’s writing on the horror of the civil service cuts, to why austerity is scorched earth policy and why international aid cuts are creating a void. As well as our recent Lead Untangles looking at the benefit cuts in more detail.