Spring Statement Update March 2025

Planning for the April increases in National Insurance costs will have been put in place by employers ready for the impending start to the new financial year, with the huge impact becoming clear.  The end to stamp duty reductions for first time buyers saw a flurry of activity as they tried to avoid missing the saving by finalising purchases by 31^st March.   Inflation seems unpredictable – increasing some months and falling in others.  The Bank of England is cautious and did not reduce the base rate at their last meeting.  Positively is in short supply, so the Chancellor’s Spring Statement was unlikely to cheer many, however hard Rachel Reeves tried to spin the content.

• The aim of the Chancellor is to make further savings of £15bn to meet her fiscal rules.
• Poor economic growth is blamed on international uncertainty, such as US tariffs introduced by President Trump.
• Incapacity benefits (the health element) for new Universal Credit claimants will be frozen until 2030.  Existing claimants would still receive an inflationary rise, but new claimants would see no increase for five years.  In 2029 there will be a reduction in the basic rate of Universal Credit.  This aims to make savings of £500m by 2030.  Whether this helps to get more people back to work or impacts negativity on those truly unable to work remains to be seen.  Details of the cuts will be clearer after the June spending review.  It is likely to impact two million claimants.
• Personal Independence Payments (PIP) will also have changes which will hit a million claimants.  The wait for details of the changes will have a negative effect on those dependent on benefits, who are already panicky about reduced income.  Doctors wrote in the British Medical Journal this week to warn of the evidence from past welfare cuts of the worsening of health or lives lost.
• The NHS and Defence budgets will be protected, but other government departments will see significant cuts of up to 11% in the spending review this summer.  The Ministry of Defence will have a further £2.2bn in funding and the abolition of NHS England will add to NHS funds.   Other departments will see a huge reduction in budgets and the number of civil servants – likely to be a return to pre-Covid and pre-Brexit levels. This could mean 50,000 job losses to the civil service.
• There was no announcement regarding whether there will be a freeze on income tax bands and allowances beyond April 2028.
• The much-discussed potential reduction of the annual ISA limit from £20,000 to £4,000 was not discussed.  Like taxation, this may be a can kicked to later in the year for the Autumn Budget.