Under the strain of slower-than-anticipated growth in 2025 and rising debt interest payments, the UK government faces a fiscal gap of 14 billion pounds (16.68 billion euros), which Shadow Chancellor Reeves sought to address largely through cuts to social security.
This decision stirred tensions within the Labour Party, as it potentially risks pushing 250,000 people, including 50,000 children, into poverty.
Reeves delivered her spring statement to Parliament in response to a short-term economic evaluation by the government’s independent forecasting office, the Office for Budget Responsibility.
In the long term, the agency’s forecast was somewhat more favorable for the government, with housing construction projected to reach a four-decade high following widespread planning reforms.
Despite expressing dissatisfaction with the growth forecast for 2025, Reeves highlighted higher growth projections for the future years.
“It’s not just about lines on a graph; it’s about improving people’s lives. Workers are still feeling the squeeze after a cost-of-living crisis that saw prices skyrocket,” said the Treasury head.
However, the agency described the outlook as “risky,” particularly on the international front, underscoring the threats posed by the prospect of a global trade war triggered by tariff policies enacted by the Trump administration.
Reflecting on the geopolitical turbulence caused by the return of U.S. President Donald Trump, Reeves told lawmakers that a “more insecure world” demands greater attention to national security.
Consequently, she confirmed a 2.2 billion pound (2.69 billion euros) increase in defense spending, which Prime Minister Keir Starmer stated is the largest boost since the end of the Cold War.
“This additional investment is not only about enhancing our national security but also about bolstering our economic security,” said Reeves.
