Finance, Policy, campaigns & research
Spring Statement 2025: Pot-hole policy-making?
Here's Jay Kennedy's take on the new measures announced in the Spring Statement 2025.
The Chancellor, Rachel Reeves, delivered her Spring Statement on Wednesday 26 March, giving an announcement that was in some ways more consequential than anticipated due to downgraded economic forecasts.
Last year the Chancellor said that budgets would move to a one-year cycle as part of facilitating greater stability and planning. This statement was expected to provide an update between the Autumn Budget last year, and a conclusion of the Spending Review process in June, where the government will finalise spending plans for government departments for several years ahead.
However, the subsequent lower ‘fiscal headroom’ compared to the Autumn forecasts – basically, the money the Chancellor has to play with whilst remaining within self-imposed spending rules – led to speculation that this announcement might include more substantial policy announcements.
International aid and welfare are soft targets for the defence rebuild
Much of what she discussed had already been previewed in the preceding weeks, namely increases to defence spending, including a £2.2 billion uplift to the Ministry of Defence budget for 2025/26. She also confirmed corresponding cuts to international aid, plus welfare changes that she argued would save £4.8 billion up to 2029/30.
These changes weren’t foreshadowed in the Autumn Budget but were trailed in the run-up to the Spring Statement, causing serious concern amongst international aid charities, disability and anti-poverty charities. This statement will have exacerbated those concerns.
The international aid sector is reeling from the Trump administration’s attempts to destroy USAID, so the UK cutting its own contribution to less than half of what it’s committed to provide in legislation adds insult to injury. In response, Bond said the government was ‘turning its back on the poorest and most marginalised people globally’.
The Trussell Trust called the benefits cuts ‘cruel, irresponsible and shameful’, and Carers UK called them ‘shocking’. The Joseph Rowntree Foundation characterised them as an ‘assault’ on the poorest (see links to reactions and expert analyses at the bottom of this piece).
The government claims that their proposed welfare changes will protect disabled people whilst supporting more unemployed people into work, but there’s no guarantee of that and they could equally push more people already struggling to pay for basic essentials further into poverty.
In fact, the government’s own impact assessment from the Department of Work and Pensions (DWP) makes for grim reading. This is a complex policy area, and the interactions between the different benefits and how they will change means that there will be winners and losers. However, this analysis says that the effects will include:
- “There will be an additional 250,000 people (including 50,000 children) in relative poverty after housing costs in 2029/30”
- “The vast majority (96%) of families that lose financially have someone with a disability in the household”
It further estimates that 800,000 people will lose Personal Independence Payments (PIP), which help people who need extra care or have mobility issues. Also, 150,000 people will lose their entitlement to carers’ benefits. Carers reduce the cost and pressure on the rest of the system and are already over-burdened and under-supported, so this seems particularly short-sighted.
Many people will support the need to boost defence spending as a result of increased international instability and the withdrawal of the US as the guarantor of European security. But many people will also question why this needs to be done on the backs of the poorest at home and abroad.
Fix the hole the right way, or fill it over and over again
A random-sounding announcement about funding for pot-holes in the run-up to the announcement got me thinking about the predicament that any government would probably be in right now. Years of underinvestment and increasing demand mean there are so many aspects of public services that need fixing, and not enough money, or not enough will to raise it, to fix all of them well.
If we think of our public services metaphorically as roads, they haven’t been properly repaved for years. They’ve been worn down by weather and water, while traffic has increased. As a result there are pot-holes everywhere, and the underlying road structure is starting to crack. They need a major overhaul rather than ever more patch-ups, but how will we pay for it? We’re at the limits of our ability to borrow without the costs of doing so getting even more expensive, and nobody wants to pay more tolls to use the roads.
It might seem cheaper to fix each pot-hole temporarily by shoveling in some asphalt and tamping it down, but repeating a bodge job over and over winds up being more costly in the long run than fixing it properly in the first place. Never mind the money needed for unexpected emergencies – just fixing the huge maintenance backlog needs up-front investment, which is in short supply.
But actually we’re talking about much more than roads or infrastructure here. We’re talking about people’s lives. The damage of poverty and social exclusion is long-lasting and can’t just be repaired with some asphalt or concrete. The effects of increasing poverty will be measured in human suffering, but also in massive future costs which don’t figure in the current forecasts and calculations.
Was this really about long-term planning?
The Labour government has branded itself as one which will take difficult long-term decisions and wants to focus on five key missions to achieve over a longer time-frame. It has a huge majority in Parliament. But just six months on from its first Budget and well before its first year in office, it has announced major spending cuts that will hit many people in need and the charities which support them. The impact of these cuts might not be immediately obvious, and they might even be popular, but that doesn’t mean they won’t be devastating.
The Chancellor says this is ‘because the world has changed’. But it’s always changing – we’ve been in a period of constant change and volatility for years. It’s therefore hard to know what to expect from the Spending Review announcement in June, and this Spring Statement offered few clues.
Apart from the impact on benefits and poverty, my main takeaway from the Spring Statement was that the Chancellor said that overall spending will still rise over the period to 2029/30. This is borne out in the tables in the supporting document on pages 41-42. A chart in the document confirms that overall spending will grow but at a lower rate than projected in the Autumn.
What’s less clear is what will happen to the individual elements that make up the whole, and how that will vary from the Autumn projections. If you look at the breakdowns for individual departments, the document only shows spending up until 2025/26. The details up to 2029/30 still aren’t worked out; presumably still to be finalised in the Spending Review process.
In the Autumn, we thought we were moving to a better path for spending areas which really impact the charity sector, such as local government finance. Areas that are really cracking and falling apart at the seams due to long-term neglect. But if the bigger and more powerful departments like Defence and Health get more money, even if overall spending ‘envelope’ is still growing marginally, then those recent gains could be reversed. We will have to wait and see.
Other sources of analysis on the impact of the Spring Statement
Stay tuned to www.dsc.org.uk, our daily bulletins and our LinkedIn for further analysis. We’ll also add links to other helpful analysis here as we come across it.
Spring Statement 2025: initial IFS response | Institute for Fiscal Studies
Benefits shake-up confirmed – Martin Lewis’ MSE News
Spring statement: Shocking carers’ benefits cuts are a first in decades | Carers UK
Immediate cuts to UK aid budget announced in the Spring Statement – Bond reaction | Bond
Spring Statement 2025 health and disability benefit reforms – Impacts
