The Chancellor’s Spring Statement did not contain a great deal we hadn’t already heard and no immediate prospects for economic growth.
In a relatively low key affair, Rachel Reeves set out her latest update on the economy and restated plans to cut the welfare budget as well as making cuts to Government departments, as we discussed last week.
Welfare is often a controversial issue but after it seems discovering her plans to impose stricter criteria for disability benefits and a freeze on incapacity benefits would not raise the £5billion expected, Ms Reeves added further measures on Wednesday.
Some figures being bandied-around suggest as many as one-in-four are disabled in some form and that cannot be right, the same as an impossible financing of one-in-five of all new cars via the Motability Scheme.
The Universal Credit health element will be cut by 50% and frozen for new claimants rather than rising in line with inflation. However, the UC standard allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30. It means a further 150,000 people will not receive carer’s allowance or the carer element of UC.
Clearly this will affect many people and the Government’s own estimates are that will mean 250,000 more people – including 50,000 children – will be pushed into ‘poverty’ by 2030.
It remains to be seen whether any of this will help the economy and employment levels, or indeed whether it will simply push spending costs up elsewhere such as the NHS, mental health and social services. It is also hardly a dent in a bulging benefit cost overall.
The news for the economy was not particularly great – the Office for Budget Responsibility (OBR) has halved its forecast for economic growth for 2025 from 2% to 1%, though the Chancellor claims the government budget will move from a £36.1bn deficit now to a £9.9bn surplus by 2030.
As seen repeatedly, forecasts can be unreliable and events in the UK or the wider world can soon turn predictions on their heads.
It’s a sad truism that war is good for business and Ms Reeves pledged to ‘boost Britain’s defence industry and to make the UK a defence industrial superpower’.
She confirmed the Government pledge to spend 2.5% of GDP on defence by 2027, plus the Ministry of Defence will get an additional £2.2bn next year.
Meanwhile, she said reforms in planning would see house building reach a more than 40-year high by 2030 and said the OBR has forecast that this will boost house building by 170,000 over the next five years, to 305,000. Conservative’s Councillor Nick Bye in Torbay has pledged to deliver leaflets for Angela Rayner in the next election if they deliver that… that’s his confidence in the target.
Plus £625m will be spent in England over four years to boost existing construction worker training schemes.
Both defence and construction industries could certainly help to grow the economy but it is far too early to say how this might pan out.
The Spring Statement documents reiterated abolishing the ‘non-dom’ regime, the same week multi-billionaire Lakshmi Mittal announces he is considering leaving too.
Another controversial issue perhaps but wealthy non-doms (now faced with paying more tax in the UK) have been leaving in ever greater numbers – you do not boost an economy by driving out the wealthiest people who pay a lot of tax here, spend here, invest and create employment.
Finally for now – and no doubt we’ll visit these individual topics more in the year ahead – the statement also confirmed Government’s plans to ‘look at’ reforms to Cash ISAs, in which you can currently deposit £20,000 per year tax free.
The idea is to drive more savers towards Market ISAs and investment in equities and bonds, rather than simply holding cash at low rates of interest – this has merit in principle but the devil will be in the detail, as ever!
