26 Mar 25. Chancellor vows to bring about “new era of security and national renewal” as she delivered a Spring Statement to kickstart economic growth, protect working people and keep Britain safe.
- People to be on average £500 a year better off by the end of this parliament compared to under the previous government, putting more money in people’s pockets.
- OBR forecast concludes government’s landmark planning reforms will result in a £6.8bn boost to the economy and housebuilding at its highest level in over 40 years by 2029-30.
- Growth at the heart of Plan for Change as £13bn of additional capital spend allocated alongside £2.2bn defence funding boost next year.
People will be on average £500 a year better off from 2029, relative to OBR’s autumn forecast, helping to deliver the Plan for Change as the Chancellor today (Wednesday 26 March) announced a Spring Statement to grasp the opportunities in a changing world.
The OBR has also today concluded that the government’s landmark planning reforms will result in UK housebuilding reaching its highest level in over 40 years, bringing the UK one step closer to its Plan for Change mission to build 1.5 m homes.
The economy will be 0.2% larger in 2029-30 because of the reforms – worth around £6.8bn in today’s money – growing to 0.4% over the next ten years. This represents the biggest positive growth effect it has ever forecasted for a policy that comes at zero-cost to taxpayers. The reforms will secure over 170,000 new homes for hard working families and leave borrowing £3.4bn lower in 2029-30.
The Chancellor also set out how the government is protecting national security and maximising the growth potential of the UK defence sector by confirming a £2.2 bn increase in the defence budget in 2025-26 while ensuring UK defence is on the cutting-edge of technology and innovation.
But growth is still not where it should be, so at this Spring Statement, this government has gone further and faster to kickstart growth by training up to 60,000 young people to get Britain building again; increasing capital investment by £13bn over this parliament; and fixing public services by tearing out waste from its roots.
Growth
Kickstarting economic growth is the number one mission of this government, putting more money in people’s pockets. The government has already made considerable progress; supporting a third runway at Heathrow; revitalising the Oxford Cambridge Growth Corridor, launching the National Wealth Fund and making the right choices on public investment to drive growth across the UK.
The actions of this government across the Autumn Budget and Spring Statement, if sustained, lead to a 0.6% rise in the level of real GDP by 2034-35, signalling the government’s growth plan is working.
The OBR concluded that the stability rule is met by £9.9bn and the investment rule is met by £15.1bn. Both rules are met two years early, meaning from 2027-28 the government is only borrowing for investment and net financial debt is falling.
The government is not satisfied with short-term growth figures, and is going further and fast today to improve this.
- To go further and faster to get Britain building, the Chancellor has today announced a further £13bn of capital investment over the Parliament to go further on growth, on top of the £100bn uplift announced at Autumn Budget. This will deliver the projects needed to catalyse private investment, boost growth and drive forward the UK’s modern industrial strategy – unlocking the potential of the Oxford Cambridge Growth Corridor which could add up to £78bn to the UK economy by 2035.
- Taken together, this greater capital investment more than offsets the modest savings on day to day spending and means the total departmental spending will increase over the next five years, when compared with plans in the Autumn.
- Over this Parliament, the government is funding a £625m package to boost skills in the construction sector, which is expected to provide up to 60,000 more skilled construction workers to support the government’s plans to deliver 1.5m homes in England over the parliament and progress vital infrastructure projects,
- As part of this, the government is providing further support to scale up existing construction skills pathway over this Parliament through £100m for 35,000 additional training places in construction-focused Skills Bootcamps, supporting trainees, ‘returners’, and existing employees to succeed in the sector. Building on the £40m investment in the new Growth and Skills Levy at Autumn Budget 2024, the government is also providing a further £40m to support up to 10,000 more young people to access new construction Foundation Apprenticeships, which will provide a key entry route into a thriving industry.
- The government is ensuring there are enough skilled construction workers in the system, with £100m to deliver 10 Technical Excellence Colleges specialised in construction across every region in England, and £165m to increase funding for training providers delivering construction courses for 16-19-year-olds and adults.
- The government is committed to supporting employers to unlock further investment in training to deliver more skilled construction workers, and is providing £100 m, alongside a £32m contribution from the Construction Industry Training Board to deliver up to 40,000 industry placements in construction each year.
- Supported by the construction skills package, the government confirmed this week that there will be a £2bn injection of new grant funding to deliver up to 18,000 new social and affordable homes. The new funding will only support developments on sites that will deliver in this Parliament, getting spades in the ground quickly to build homes in places such as Manchester and Liverpool.
Defence
The world is changing before our eyes, reshaped by global instability, including Russian aggression in Ukraine. Europe is facing a once-in-a-generation moment for its collective security, with conflicts overseas undermining security and prosperity at home.
A month ago, the PM announced the biggest sustained increase in defence spending since the Cold War as a result of the changing global picture, now reaching 2.5% of GDP by April 2027, and with an ambition to reach 3% in the next Parliament subject to economic and fiscal conditions.
We are going further and faster to protect our national security and maximise the economic growth potential of the UK defence sector.
- Increasing the defence budget by £2.2bn in 2025-26, taking additional spending on defence to over £5bn since the Autumn Budget.
- This raises spending on defence to 2.36% next year and will be invested in fitting Royal Navy ships with Directed Energy Weapons five years earlier than planned, providing better homes for military families and modernising His Majesty’s Naval Base Portsmouth.
- Setting a minimum 10 percent ringfence for equipment spending on emerging technologies like drones and autonomous systems, dual-use technology, and AI-powered capabilities, so that British troops have the tools they need to fight and win in modern warfare.
- Getting this new tech into the hands of our armed forces quicker by cutting away bureaucracy, with a new UK Defence Innovation unit within the Ministry of Defence spearheading efforts to identify promising technology and ensure these get to the frontline at speed, while also bolstering the UK tech sector and crowding in private investment.
- Creating bespoke procurement processes for different types of military equipment, learning lessons from our rapid support for Ukraine to drive faster timescale targets for operationalising new tanks, aircraft and other essential tools for modern warfare.
- This government is determined to transform the defence sector into an engine for growth by focusing this investment on where it boosts the productive capacity of the economy such as investment in innovation and novel technologies. As a result of the increase in defence spending to 2.5%, the government estimates this could lead to around 0.3% higher GDP in the long run, equivalent to around £11bn of GDP in today’s money.
- The government’s investment in defence will also support its number one mission to deliver economic growth. UK citizens will be protected from threats at home whilst creating a stable environment in which businesses can thrive, and supporting highly skilled jobs and apprenticeships across the whole of the UK.
Reform
The government is determined to make the public sector more productive and to improve services for working people. But the changing world means we need to go further and faster to ensure we can deliver the public services that working people care most about.
The government has shown its commitment to taking the difficult decisions required to drive efficiencies and reform the state – including announcing that the world’s largest quango, NHS England, will be brought back into the Department for Health and Social Care, reducing bureaucratic inefficiencies and duplication; and driving out wasteful government spend through cancelling thousands of government credit cards.
Getting more people into jobs is also central to the government’s growth mission. This broken welfare system that is letting people down by asking them to prove what they can’t do, rather than focusing on what they could do with the right support – trapping people due to fear of trying work, lack of support and poor financial incentives.
The social security system will always protect those who can never work, that is why this government is proposing an additional premium that will safeguard their incomes. And will end reassessments for people with the most severe, life-long conditions to give them dignity and security.
Helping more people into work is a central aim of these reforms and which is why the government is tackling incentives to be inactive by abolishing the WCA, rebalancing Universal Credit, and investing more into employment support.
We will always support those with long term health conditions through the Personal Independence Payment, which will remain an important non-means tested benefit for disabled people and people with long term health conditions. But these reforms will make the system more targeted and sustainable to ensure the safety net is there for those who need it most.
The OBR have now set out their final assessment of costings and confirmed this welfare package will reduce welfare spending by £4.8bn in 2029-30.
The government will modernise the Civil Service into a more productive and agile organisation that can effectively deliver the Plan for Change, underpinned by a digital revolution, while cancelling thousands of government procurement cards. Today, the Chancellor has gone further.
- The Chancellor has confirmed the creation of a £3.25bn Transformation Fund to support the fundamental reform of public services, seize the opportunities of digital technology and Artificial Intelligence (AI), and transform frontline delivery to release savings for taxpayers over the long-term.
- The Fund will invest in vital public services and accelerate the modernisation of the state by taking the next step to reform the children’s social care system through an additional £25m for the fostering system. This will include funding the recruitment of a further 400 new fostering households, providing children with stability and addressing cost pressures on local government.
- The fund will also support the managing offenders in the community, by providing £8 m for new technology so probation officers can focus on reducing reoffending, rather than filling out forms.
- In addition, it will provide £42m for three pioneering DSIT-led Frontier AI Exemplars. These Exemplars will test and deploy AI applications to make government operations more efficient and effective and improve outcomes for citizens by reducing unnecessary bureaucracy.
- To create an agile and productive state we are also providing £150m for government employee exit schemes. This will support a leaner and more efficient Civil Service, helping to reduce administration costs by 15% by the end of the decade.
- The Chancellor also announced a package of measures to close the tax gap, raising £1bn per year by 2029-30. The UK tax gap was estimated to be around £40 bn in 2022-23.
- The Spring Statement earmarks around £80m in new money for third party debt collectors to bring in £1.3bn over the next five years – a return of around £16 for every pound spent for UK public services and investment projects. HMRC will also receive £4m in new funding to pilot a new test and learn programme with the private sector to improve the tax collection agency’s approach to recouping older unpaid tax debt. Ministers will decide whether to proceed with a larger exercise later this year based on the results of this test.
- An additional 600 staff will also be recruited into HMRC’s debt management teams. This means that for every £1 spent on these staff, over £13 of debt is expected to be recovered. The staff will work with the private sector to make collecting tax debt more efficient including through automating admin processes.
- The Spring Statement also announces £100m in new funding for HMRC to recruit a further 500 compliance officers from April 2025. This will raise £241 m in unpaid tax over the next five years.
- Late payment penalties for VAT and Making Tax Digital for income tax Self Assessment will increase to incentivise taxpayers to pay on time. This will be from 2% to 3% at 15 days, 2% to 3% at 30 days, and 4% to 10% from day 31. This will take effect from April 2025.
- As announced in the autumn, Making Tax Digital for income tax Self Assessment will be extended to sole traders and landlords with income over £20,000. The Spring Statement confirms that this additional group will join Making Tax Digital from April 2028. This will build on the existing plan which will see sole traders and landlords with income above £50,000 joining from April 2026, and those with income above £30,000 joining from April 2027. Around 4 m businesses have an income below the £20,000 threshold.
Looking Forward
This Spring Statement builds on the Autumn Budget and the decisions taken since required to deliver stability to the British economy and kickstart economic growth.
The government will set out its plans for spending and key public sector reforms at the Spending Review which will conclude on 11 June 2025.
This will not be a business-as-usual Spending Review. The government has fundamentally reformed the process to make it zero-based, collaborative, and data-led, in order to ensure a laser-like focus on the biggest opportunities to rewire the state and deliver the Plan for Change.
At the Spending Review, the Budget in the autumn and across the Parliament, the government will continue to prioritise growing the economy to deliver change.
(Source: https://www.gov.uk/)
Tanya Suarez, Lead of Janus accelerator in partnership with DASA and CEO of IoT Tribe: “With current levels of geopolitical instability, it is imperative that we bolster the UK’s defence capabilities to safeguard national and economic security. The Chancellor’s announcement today of a £400m commitment to the defence technology ecosystem, and 10% of the MoD’s budget which will be allocated to novel technologies like drones and AI, will be a catalyst for faster innovation. Collaboration between government and private sector stakeholders, including category-leading start-ups, will accelerate the go-to-market of cutting-edge defence technologies. It will help reindustrialise our economy, establish robust sovereign capabilities and drive productivity in non-defence sectors. Government support and investment through organisations like DASA will go a long way to ensuring that the most promising technologies rapidly transition from lab to front line, reaching the hands of those that need them.”
Andriy Dovbenko, Founder and Principal, UK-Ukraine TechExchange: “What Britain needed from the Spring Statement were concrete steps towards boosting its defence capabilities. Therefore, the confirmation that defence spending will rise to 2.5% by 2027, plus the dedication of £400m in funding for DefenceTech initiatives, is extremely encouraging to see. It’s true that more needs to be done – the figure is still inadequate compared with the resources of other global powers like russia – but the focus must now be on achieving more with less in the immediate future. The effective allocation of our limited defence resources will be crucial, ensuring that this additional funding does not disappear into our primes but fulfils its intended purpose.
The focus on nurturing homegrown tech talent to enhance military tactics is hugely positive, with technologies such as cybersecurity, AI capabilities and electronic warfare key to our future national resilience. However, we should not underestimate the power of leveraging battlefield-proven defence technologies from Ukraine to ensure our defence strategies reflect the realities of modern-day warfare. We should also seek new ways to incentivise private investment that ensures public funding goes further in supporting the growth of promising DefenceTech companies. We could, for example, mirror Denmark’s new €130 million government programme that guarantees to compensate Danish companies willing to invest in Ukraine’s defence industry. A combination of public and private funding could help to close the gap between the UK and other global powers in defence.”
Volodymyr Levykin, CEO and Founder, Skyrora: “The Government’s newly announced defence innovation fund and commitment to the biggest defence spending increase since the end of the Cold War demonstrate where defence sits on the political agenda. However, now is the time for the UK to tap into the strength of its space sector to develop sovereign defence capabilities, if it is to truly become a defence industrial superpower. Any investment into space catalyses tech development, so investing more in defence (read space) speeds up innovation and the production process.
Space is the great enabler between industries and the first battlefield for effective defence strategies. If the UK invests more in sovereign launch capabilities, we would not depend on third parties for satellite-based activities such as intelligence, reconnaissance and communications. Ultimately, more investment in defence should automatically mean more investment in space. In turn, we will foster greater innovation, boost the economy, and keep the nation safe.”