The Spring Statement: What could lie ahead for Labour?

Ellie Anderson
25/03/2025

With only a day to go until Chancellor Rachel Reeves announces the Spring Statement, what she surely hoped would be a small event, is now the product of much speculation and flutter.

Committing to just one fiscal event a year – the Autumn Budget – the Spring Statement was always billed to be a low-key affair with few policy announcements. However, these hopes appear to have been dashed as economic uncertainty and international turmoil force the Chancellor to rethink her spending and borrowing plans.

Leaving herself a £9.9 billion headroom following the Autumn Budget – considered a fine margin in economic terms – the Chancellor set herself a list of ‘pass or fail’ fiscal rules, declaring them to be ‘non-negotiable’. This included running a budget surplus – borrowing only to invest – which she views as the ‘bedrock of economic stability’.

In layman’s terms, this means the Government has needed to look to cut spending – and fast, to ensure it meets its own economic rules. With events uncertain abroad, and Government borrowing up by £11.6 billion from the previous financial year, we could well expect the Chancellor to take more drastic actions tomorrow.

Already, we expect the Chancellor to call on Government Departments to reduce their budgets by 5% at the Comprehensive Spending Review, due to be published on the 11th of June. However, this projected figure could now rise to a far higher figure – much to the likely upset of her colleagues. Already, several senior sources across government have revealed how they have been asked to identify the 20% of spending within their departments that they see as lowest priority, with another source suggesting they had been asked to go even further - up to 40%.

This will form the biggest spending cuts since austerity, in a move which could mean reductions of as much as 7% for some departments over the next four years.

Alongside this, and much to the horror of some of her colleagues, there has been a heavy focus on cutting benefits. Unveiling the plans last Tuesday, the Secretary of State for Work and Pensions, Liz Kendall, announced the Government are looking to ‘save’ £5bn by 2030. Though the Government has not given a precise breakdown of the forecast savings, it is widely expected the bulk is to come from changes to eligibility for disability payments, alongside removing the ability for under-22-year-olds to claim the incapacity benefit top-up to.

Many fear this could have long-lasting damage to Labour’s future electoral success, particularly with elections for local councils happening in May, and highly anticipated devolved governments taking place in just 14 months time. With the vast majority of benefit claimants now living in Labour held seats, we are already seeing kick-back from the Labour faithful – with over 100 Labour MPs paying Liz Kendall a visit in the previous week to voice their ‘grave concerns’ about what this could mean to working and disabled people.

Amplifying the Chancellor’s headache, concerns have also been raised on the impact of Reeves' previously announced tax rises on businesses, set to take effect in a matter of weeks. With inflation also expected to rise in the coming months as households are hit with increases to energy, water and council tax bills, some have pointed to the timing of the Spring Statement as particularly damaging.

With Reform knocking on the door - polling neck and neck with Labour in national polls - pressure is mounting on Reeves to adopt an alternative approach. As for tomorrow, only the Chancellor can decide between maintaining her hardline rules or avoiding inflicting pain on an already financially-bruised Britain.