The Chancellor, Rachel Reeves, led her Spring Statement in Parliament with four proud statements: inflation is down, borrowing is down, living standards are up and the economy is growing.
The Chancellor was careful to stress that this was not a Budget, as that event is now fixed in the Autumn, and that she would not be announcing any changes in taxation or spending. She was there to outline the latest economic forecasts from the Office for Budget Responsibility (OBR).
The 131-page Economic and Fiscal Outlook suggests that a loosening labour market and falling energy and food price inflation will contribute to inflation reaching its 2% target in late 2026, with slowing wage growth contributing to the OBR forecast of CPI inflation falling from 3.4% in 2025 to 2.3% in 2026 and 2% from 2027 onwards.
The Chancellor said that unemployment, which currently stands at 5.2%, would peak later this year at 5.33% and then fall in every year of the forecast period, ending the current Parliament at 4.1%. She noted that the OBR has downgraded its forecast for economic growth for this year from 1.4% to 1.1% but that it expects growth to then rise to 1.6% in 2027 and 2028, falling back slightly to 1.5% in both 2029 and 2030.
However, the Chancellor stated, after accounting for inflation, people are forecast to be over £1000 a year better off by the next election. Pointing to six cuts in interest rates since the 2024 election, Ms Reeves claimed that this will save households over £1300 a year on a typical new fixed-rate mortgage. Finally, she highlighted the forecast that she will meet her main borrowing target, in 2029/2030, with over £23 billion to spare.
It’s important to note the OBR forecasts were being finalised as conflict broke out in the Middle East and could not take account of the possible impact on the energy market. The OBR has warned: “Conflict in the Middle East, which escalated as we were finalising this document, could have very significant impacts on the global and UK economies.”
