Spring Statement 2025 - crunch time nears

Why the 26th of March will be a test for the Chancellor’s pledge to stick to one fiscal event per year - it is four weeks away now.

The mid-December press release* from the Treasury said: 

“The Chancellor remains committed to one major fiscal event a year to give families and businesses stability and certainty on upcoming tax and spending changes and, in turn, to support the government’s growth mission.” 

Two months later, the Treasury may now be regretting that restatement of words from the Labour manifesto. Recently, Bloomberg’s Lobby Team saw the first Office for Budget Responsibility (OBR) forecast presented to the Chancellor ahead of the 26th of March. Bloomberg’s report** suggested that the OBR’s preliminary forecast had cut projected growth, resulting in a small deficit in the current account for 2029/30. That would be bad news for Rachel Reeves as, when she revised the fiscal rules last October, one of her new goals was for the current account to be in surplus by 2029/30, i.e. for revenue to fully cover day-to-day spending. 

At the time of the Autumn 2024 Budget, the OBR projected a £9.9bn surplus (aka headroom) for the current account metric but also noted that it was “…the third-lowest of 28 forecasts since the OBR was established in 2010…”. The two lower ones were both recorded by Reeves’ predecessor. The OBR also observed that “…the current budget has only been in balance or surplus in three years since the start of the century.” 

The Permanent Secretary at the Treasury has responded by launching a leak investigation while simultaneously denying that his action implied the Bloomberg story was correct. There are two points to remember at this stage: 

1. The one thing that Whitehall leak enquiries generally fail to do is discover the source of the (alleged) leak. 
2. This was only the first cut from the OBR. Bloomberg expects there to be five iterations. For the last Budget the OBR produced eight sets of numbers, albeit that was a mix of fiscal and economic forecasts. Version one of the Spring Forecast could be significantly different from the final publication, which is not likely to be presented to the Chancellor until the 21st of March. 

There have already been suggestions that the Chancellor may introduce some (minor) tax changes on the 26th of March to reclaim some headroom before making more significant moves in the autumn. One rumour is that she will extend the personal allowance and income tax rate band freezes for another two years, through to 2029/30. In practice that looks a difficult political option as Reeves specifically ruled out the idea in the October Budget, saying “From 2028/29, personal tax thresholds will be uprated in line with inflation once again.” Spending cuts currently look the more likely ingredient for the 26th of March. 

Last week delivered fresh data for the Chancellor and the OBR to consider, with the earnings growth figures supplied on the 18th of February, followed by the January inflation numbers on the 19th which showed a rise from December 2.5% to 3%. The end of the week also saw the publication of the public sector finance dataset for January, usually a bumper month for tax revenue that creates a once-a-year surplus. 

As always we will be providing commentary on the Spring Statement on the day, highlighting any key considerations for financial planning, and if you have any related questions please get in touch.

The information in this article is correct as at 24/02/2025.

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

• *https://www.gov.uk/government/news/chancellor-commissions-spring-forecast-on-26-march-2025
• **https://www.bloomberg.com/news/articles/2025-02-11/reeves-is-in-the-red-after-uk-watchdog-downgrades-growth-call?srnd=undefined&embedded-checkout=true