“She borrowed and spent and taxed like it was the 1970s. Little wonder, Mr Speaker, that the Chancellor has tanked the economy.”
Tax burden to hit record high after UK growth downgrade.
Taxes are set to hit a record share of the economy under Chancellor Rachel Reeves, the UK’s budget watchdog warned, as she delivered her Spring Statement to Parliament earlier today.
In a grim assessment of Britain’s finances, the Office for Budget Responsibility (OBR) halved its economic growth forecast for 2025 from 2% to just 1%, while revealing that the tax burden will soar to an all-time high of 37.7% of GDP by 2027-28.
In her Spring Statement the Labour Chancellor pointed the finger at “global uncertainty” and “chaos caused by Donald Trump”, insisting that the world was “changing before our eyes”.
Speaking in the Commons, Ms Reeves said: “This moment demands an active government. A government not stepping back, but stepping up. A government on the side of working people, helping Britain reach its full potential.”
Despite ruling out any new tax rises, Reeves’ previously announced £40 billion tax raid will come into force next month. That includes increases to National Insurance, a freeze on income tax thresholds, and higher stamp duty – changes opponents say will unleash a “tidal wave” of costs for working families and businesses.
The pound slumped following the announcement, dropping 0.5% to a two-week low of $1.288.
GROWTH HALVED
The Chancellor’s flagship mission to grow the economy took a major hit, with the OBR downgrading GDP growth to 1% for 2025. Reeves admitted she was “not satisfied with these numbers” but insisted that action such as a third runway at Heathrow, planning reforms, pension investment and the National Wealth Fund would lift Britain’s economic prospects.
The OBR has predicted that growth will remain sluggish over the next few years, reaching just 1.9% in 2026, followed by 1.8% in 2027 and 1.7% in 2028.
Unemployment is also expected to worsen, with the number of jobless people forecast to peak at 1.6 million – around 160,000 more than previously expected.
RECORD TAX BURDEN
Although Ms Reeves promised no additional tax rises in her statement, the OBR warned that taxes as a share of the economy will rise to an unprecedented 37.7% of GDP by 2027-28 – up from 35.3%.
That surpasses the level projected under Jeremy Hunt’s Spring Statement last year, when taxes were expected to peak at 37.1% by 2028-29.
£4.8 BILLION IN WELFARE CUTS
Welfare reforms formed a central plank of Ms Reeves’ Spring Statement, with £4.8 billion in annual cuts confirmed – slightly less than the £5 billion originally touted.
The Chancellor announced deep reforms to disability and sickness benefits, with the health element of Universal Credit set to be cut by 50% and frozen for new claimants. However, the standard allowance will increase from £92 to £106 per week by 2029-30.
An official Government impact assessment released alongside the statement revealed that the welfare reforms will push 250,000 people – including 50,000 children – into relative poverty by 2029-30.
WHITEHALL SPENDING SLASHED
In a major shake-up of the Civil Service, the Chancellor pledged to cut government running costs by 15%, or £2 billion, by the end of the decade.
A £3.25 billion “transformation fund” will modernise departments with new AI systems and software, and fund voluntary redundancies across Whitehall. It’s estimated up to 50,000 Civil Service jobs could go.
Overall, Ms Reeves said a leaner government would save £6.1 billion a year by 2029-30.
DEFENCE DOWN PAYMENT
Ms Reeves also announced a £2.2 billion “down payment” for defence spending next year, in line with Labour’s commitment to raise defence expenditure to 2.5% of GDP by 2027.
At least 10% of the defence budget will be allocated to “novel technologies including drones and AI”, with £400 million earmarked for defence innovation.
PLANNING SHAKE-UP
Planning reforms featured heavily in the Spring Statement, with the Chancellor reaffirming the Government’s ambition to unleash a housebuilding boom.
The proposed Planning and Infrastructure Bill will reintroduce mandatory housing targets and loosen restrictions on building on the Green Belt.
Ms Reeves said the changes would boost GDP by 0.6% within ten years, adding £15.1 billion to the economy annually.
OPPOSITION REACTION
Mel Stride, the Shadow Chancellor, launched a scathing attack on the Government’s plans, branding the Spring Statement reckless.
He told MPs: “She borrowed and spent and taxed like it was the 1970s. Little wonder, Mr Speaker, that the Chancellor has tanked the economy.”
THE NUMBERS AT A GLANCE
- Growth forecast for 2025: Halved from 2% to 1%
- Tax burden: To rise to 37.7% of GDP by 2027-28
- Welfare cuts: £4.8 billion annually
- Whitehall savings: £6.1 billion by 2029-30
- Defence spending: £2.2 billion down payment
- Unemployment: Expected to rise to 1.6 million
- Inflation: 3.2% in 2025
- Relative poverty: 250,000 more people, including 50,000 children, by 2029-30
Main Photo: Chancellor Rachel Reeves leaves No 11 Downing Street to deliver her Spring Statement. Picture by Lauren Hurley / 10 Downing Street. CC BY-NC-ND 2.0. www.creativecommons.org/licenses/by-nc-nd/2.0
