Spring Statement: Riding on the Autumn Budget and OBR forecasts, but will the economy grow?
Subrahmaniam Krishnan-Harihara, Director of Business Policy and Research at Greater Manchester Chamber of Commerce, gives his reaction to the Spring Statement.
In a brisk and politically charged 20-minute speech to the Commons this afternoon, Chancellor Rachel Reeves claimed that recent economic data was a vindication of her Autumn Budget. Whilst she acknowledged the situation in the Middle East and the potential for economic disruption, there was no concrete measure to navigate the impact of a possible oil price shock or other turmoil.
The Chancellor led with the latest publication from the Office for Budget Responsibility (OBR), which forecast inflation to fall this year leading to a softening in interest rates and reduced borrowing. The Chancellor claimed that the recent increase in consumer spending was evidence of a rise in living standards and resilience in the economy – all attained through Labour's "right plan" for stability, investment and reform.
Another aspect to the speech was the impact public sector spending pledges could achieve. These include the freeze in rail fares, extended fuel duty cuts, defence spending and scrapping the two-child benefit limit. Yet the speech's critical shortfall lies in its lack of fresh stimulus. Growth for 2026 was downgraded to 1.1% while unemployment is set to peak later this year before falling to 4.1% by 2030. GDP per capita, which recently saw a decline, is also forecast to rise 5.6% over the parliament. As has often been the case with forecasts, near-term growth has been downgraded while touting progress in later years. GDP growth is expected to be 1.6% in 2027-28 and 1.5% in 2029-30. Likewise, borrowing is expected to fall by 2029/30 when the Chancellor also expects to have additional headroom against stability rules and attain savings in debt interest payments.
Nonetheless, the speech indicated calmness – the Shadow Chancellor called it complacency – and not wanting to commit to any specific policy measures although the Chancellor did repeat her “in the next few weeks” line for additional announcements. There was passing mention of improving global ties, AI innovation and regional growth all without any substantiation. Overall, the Chancellor reinforced Labour's narrative of progress, but the speech's heavy partisanship and deferred optimism reveal critical vulnerabilities. With no shields against energy price shocks, forecasts could falter and put to test the steady and stable image she wants to project and the UK’s economic resilience.
