Description

Tune in to this episode for a deep dive into the upcoming Spring Statement 2025, where the Chancellor will respond to the latest economic and public finances forecast from the independent Office for Budget Responsibility (OBR), due on 26 March 2025. While the Spring Statement was initially expected to be a response to the OBR's forecast, there's speculation about potential announcements on spending and possibly tax to ensure the government meets its fiscal rules.

We unpack the international and economic backdrop, including the impact of the Trump administration's trade policies and the UK's increasing defence spending following President Trump's stance on Russia and NATO. We also examine the modest UK economic growth since mid-2024 and concerns voiced by business groups regarding upcoming tax increases and the rise in the minimum wage in April. The OBR is likely to lower its GDP growth forecast for 2025. 

We also delve into the UK's fiscal rules, which focus on the current budget and public sector net financial liabilities (PSNFL). 

Key Takeaways:

• The Spring Statement 2025 on 26 March will see the Chancellor respond to the latest OBR economic forecast.
• There is speculation that new spending and tax policies might be announced to ensure the government meets its fiscal rules for 2029/30.
• The UK economy has experienced modest growth, and business sentiment has weakened due to upcoming tax and wage increases. The OBR is expected to lower its GDP growth forecast.
• The government's fiscal rules require a current budget surplus and falling public sector net financial liabilities as a percentage of GDP by 2029/30. These were met with small margins in the previous forecast.
• Several factors, including higher interest rates and potentially lower economic growth, could put pressure on the Chancellor's headroom against the fiscal rules.
• The government is undertaking a Spending Review, with phase 2 concluding in June 2025.
• Changes to employer NI contributions, personal tax threshold freezes, and increases to inflation-linked benefits and the National Minimum Wage are set to take effect in April 2025.

Source: Commons Library 

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No outside chatter: source material only taken from Hansard and the Parliament UK website.

Contains Parliamentary information repurposed under the Open Parliament Licence v3.0.