Spring Statement 2025
- James Kingston
- Mar 26
- 2 min read
From a stability point of view at least, thankfully no changes to the tax system for the upcoming tax year, over and above what we already know about.
If tax interests you then here is a reminder of the upcoming changes for 25-26:
Rather than tax tinkering, it was a spring statement (or emergency budget as Mel Stride called it), made to preserve the self imposed fiscal rules put in place by the Labour government.
Here is an interpretation of what’s going on economically:
The government borrows money by issuing bonds to individuals and institutional investors (like pension funds), in order to bridge the gap between what it spends on public services, and what it brings in mainly through taxation.
One of the golden rules of financial management, is that we should where possible borrow only to invest, not to fund our every day expenses. Unfortunately that’s not happening.
We as a nation are borrowing more and more. Our national debt currently stands at £2.8 trillion, or £2,800,000,000,000. A lot of moola.
The cost of servicing this debt per year through interest payments is well over £100 billion. That’s equivalent to 8% of total public spending, around the same as Defence and Public Order put together.
The Chancellor Rachel Reeves’ commitments are that by the end of this parliament in 28/29:
Day to day public spending should not exceed tax revenue year on year, with money only borrowed for capital investment.
Debt should start falling as a percentage of GDP
Sensible stuff. However the way in which we achieve these targets, and how flexible we are with their metrics, is what causes fierce debate.
Should public spending be cut? Should taxes increase? Should we boost productivity to stimulate economic growth? The Chancellor’s response is yes to all 3.
In terms of cutting public spending, the welfare state and international development (£4.4bn) were the overwhelming targets this time round offset by an increase in defence spending (£2.2bn) in the face of global security issues.
We know already of tax rises through measures such as fiscal drag and an increase in employers NI, supported by the investment in tax fraud investigation.
In terms of growth, the forecast rate for 2025 was halved by the OBR from 2% to 1%. Growth forecasts for 2026 onwards however was upgraded compared to that published in the Autumn.
It’s hoped by the maintenance of the government’s capital investment programme, the implementation of the ambitious house building targets, and the return to work of millions of economically inactive individuals, that growth will increase further.
.png)
Comentarios