Spring Statement 2025: Cuts and reform – can the economy be reborn?

Among reports of cabinet disagreements and growing fiscal pressures, the Chancellor defaulted to her message present throughout October’s Budget.  Security was the theme then, and security – albeit in the form of military might – is the theme now. An increase in defence spending was supported by promises to put Britain at the heart of global advanced manufacturing and innovation.

Labour began this Parliament making claims of a weak fiscal inheritance, and the Chancellor pointed again at the opposition to justify welfare and day-to-day departmental spending cuts to balance the country’s finances and promote growth.

With June’s Spending Review set to provide further detail on tightened budgets, and talks of an even tougher Budget this autumn, not even the sunshine could hide the looks of discontent coming from some Labour MPs.

The cuts to welfare and departmental spending mark a watershed moment for the Government. Intent on staying within self-imposed fiscal rules, the Chancellor dodged calls for tax changes or extra borrowing despite the OBR’s growth forecast being slashed in half to one per cent.

Labour has bemoaned the bureaucracy it sees as holding the country back from sustained growth.  This narrative is not new – Liz Truss despaired ‘the blob’, and the focus on government ‘efficiency’ coming out of the US is clear to see. Is Labour echoing Trumpian language? Not quite, but there are parallels in the Chancellor’s aim to cut the Civil Service’s running costs by 15 per cent.

Tearing down regulatory barriers is central to kickstarting delivery, be it the third runway for Heathrow or the Lower Thames Crossing - both recently promised. But with this being the last major economic event before May’s local elections, the optimistic message of infrastructure delivery may strike fear into some local Labour councillors as opponents, including an insurgent Reform Party, look to supercharge NIMBYism to inflict more pain on the Government.

Turning to much-needed reforms, Labour’s changes to the National Planning Policy Framework and the recently laid Planning and Infrastructure Bill have been met positively by industry figures as the Chancellor banks on the rapid delivery of housing and infrastructure to boost the UK’s economy. To round off the message of delivery, £600 million has been put towards training the next generation of construction workers, continuing to back the builders over the blockers.

The message in October was to stabilise, the message yesterday was to defend – what will Labour’s narrative be in June or October? Some will hope they go on the fiscal offensive, though we’re likely to see more of the same until the wider economic headwinds shift.

“The world is changing”, said Rachel Reeves as she closed her speech, and it’s this seemingly constant, unpredictable change which Labour continues to grapple with. As the Chancellor attempts to balance a record increase in defence spending with a defence of her own record, can the Government spring the economy into life or is worse yet to come?