The Spring Budget 2025

The Chancellor of the Exchequer Rachel Reeves presides over a country with the highest level of taxes this century! The Office for Budget Responsibility has forecast that the UK will be in a deficit of £36.1 billion in 2025-26.

The Chancellor has not according to their own manifesto raised the level of tax on ‘working people’, in what world did she think that employers would absorb the increases in Employer’s National Insurance Contributions ‘NIC, without any direct consequence to working people?

From April 2025, employers will face an increase in National Insurance Contributions (NICs), with the rate rising from 13.8% to 15%, and the secondary threshold (the point at which employers start paying NICs) decreasing from £9,100 to £5,000 per employee. This has made it significantly more expensive for someone to be employed in the UK, major companies have already announced job cuts to offset the increased costs, pay raises have been cancelled or significantly scaled down and recruitment has been cancelled.

What will happen to all those people that are forced off benefits with no jobs to go to?

The policies of this government as opposed to what they say, do not point in the direction of growth or getting people into the workplace!

Thankfully we don’t have any new tax changes announced in this Spring Statement, but it is expected in order for the Chancellor to balance the books that there will be ever more tax rises later in the year!

Economic Outlook

The Office for Budget Responsibility (OBR) revised its economic forecasts, projecting a decrease in GDP growth from an initial 2% to 1% for the current year. Inflation is expected to average 3.2% in 2025, with a gradual decline to approximately 2% by 2027.

Fiscal Measures and Public Spending

Chancellor Reeves reaffirmed the government’s dedication to maintaining fiscal discipline without introducing new tax increases. Instead, efforts will focus on enhancing tax collection and combating tax evasion, with measures projected to generate an additional £1 billion in revenue.

How will this be achieved? A massive recruitment drive of new staff into HMRC? Surely experienced staff will be required or will the Artificial Intelligence ‘AI’ achieve this?

To address budgetary constraints, the government announced plans to reduce welfare spending by £500 million by 2030. This includes tightening eligibility for the Personal Independence Payment and freezing the additional Universal Credit payment until 2030. These measures aim to achieve a projected surplus of £9.9 billion by the 2029-30 fiscal year i.e. exactly the same as the headroom required against the government’s own stability rule.

Investment in Public Services and Defence

The statement introduced a £3.25 billion Transformation Fund designed to enhance public service efficiency through investments in advanced technologies, including artificial intelligence and to pay off failing civil servants. Given this country’s past experience of the failure of government IT projects, we expect the majority of this fund will be wasted in both IT projects that are shelved after years of employing the big consultancy firms and a huge amount in gold plated redundancy payments to civil servants.

Additionally, the government plans to allocate an extra £2.2 billion to defence spending, focusing on modernising equipment and infrastructure, and emphasising investments in advanced technologies such as drones and AI. Hopefully this includes our troops being provided with functioning armour and rifles that actually do what they are supposed to. Only last month it was reported that British soldiers use aging rifles that would not penetrate the current standard of body armour used by Russian and Chinese soldiers.

Housing and Infrastructure Initiatives

The government outlined planning reforms aimed at facilitating the construction of 1.3 million homes within the next five years, contributing to a projected 0.4% increase in GDP over the next decade. These reforms are part of a broader strategy to stimulate economic growth through infrastructure development.

The Chancellor announced a £600m measure to train more people to enter the construction industry, as construction workers are critical to meeting the government’s building targets. Where will these workers come from? This country has outsourced construction for so many years and Brexit has decimated the availability of experienced foreign construction labour. This country has not promoted construction as a career for far too long, how will we find these new workers? Will a job in construction be forced upon those being pushed off benefits?

Political and Public Response

The universal credit standard allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30, while the universal credit health element will be cut by 50 per cent and be frozen for new claimants. There will also be a stricter eligibility test for personal independence payments (Pips), the main disability benefit, from November 2026.

There is of course always the ability to be more efficient in how this country spends it money on welfare. Have the changes been sufficiently well thought out so as not to adversely affect the most vulnerable of our population?

The welfare state ballooned during the COVID-19 pandemic with many new claimants experiencing mental health issues, and this has significantly increased the welfare spend. Will some of the savings be invested in supporting these claimants to deal with these issues before stopping their benefits?

There will be many traditional Labour voters that will be adversely affected by this government’s welfare cuts but how many of Labour’s own MPs will block these changes?

Which voter demographic has this government not turned their back to?

Call to action

Against this challenging financial climate, what can you do to improve your own financial position?

Read our Tax Year End Planning –  The Tax Trap guide attached and act before 6 April 2025.

Click below…

Tax Trap guide March 2025