As expected, Chancellor Rachel Reeves has delivered her Spring Statement today as the Office for Budgetary Responsibility (OBR) has unveiled its economic forecasts for 2026, and it simply could not have come at a worse time.
Having just lost the Gorton and Denton by-election, getting increasingly involved in a Middle-Eastern conflict that is rapidly growing out of control and, in the early-hours of this morning, a Yougov poll showing that the Greens had overtaken Labour, the government absolutely needed some good economic news today.
Outlined in the OBR’s report are decreased growth forecasts, increased headrooms against Reeves’ spending rules and falling inflation.
These budgetary statements are often confusing, full of jargon and unclear; nevertheless, given the rampant political woes of the Labour government, today’s statement has become more important than ever to the future of the Labour government and, of course, to the people of Britain.
So today, Brig will attempt to cut through the complicated language and ridiculously dense OBR report in order to explain what these forecasts mean for you and how they might affect Labour’s political fortunes as the first indications of the effects of the 2025 Budget.
The Good News
We’ll start with some good news: Inflation, the rate at which prices increase, is falling. The report forecasts that it will reach 2.3% by 2026 and reach the Bank of England’s target of 2% by the end of the year.
Now that doesn’t mean that prices are going to be coming down, just that they’re going to be rising more slowly. Nevertheless, Reeves is potentially on track to have inflation under control for the first time since COVID. That is with one massive, glaring disclaimer, which is the war in Iran.
The OBR have not included the war’s potential impact on oil prices in their report, which, much like the Russian invasion of Ukraine, could send energy prices and the cost-of-living skyrocketing.
It unfortunately means that one of the only good headlines in the report has been severely undermined, and that even after these forecasts, we simply don’t know if inflation will be able to be brought to heel.
Also in her statement, in a grand headline-grabbing claim, Reeves claimed that the average household will be £1000 better off by the time of the 2029 election. But is this true? Well, it entirely depends.
What she’s describing is not some sort of new government payment or grant but instead an economic measure called Real Household Disposable Income, a number which measures how much money people have to spend, on average, when adjusted for inflation.
Indeed, the numbers look good here, with the OBR saying there was a 3.1% increase last year that is then expected to only rise by 0.1% this year. These numbers look good on paper, but the rise in costs of things such as rents or housing (Which the OBR report also forecasts) can quickly offset these increases.
More importantly, these numbers don’t look at where these increases in household income are occurring, which, in an increasingly unequal UK economy, is often in the wealthiest families. So Reeves’ claim here is a bit misleading, and most households probably won’t feel that they’re that much better off.
The Okay News
The OBR has also revised its GDP growth forecasts. GDP, or Gross Domestic Product being a measure of how many goods and services are being provided in the country and is generally seen as a measure of how well the economy is doing overall
They’ve been revised down slightly for this year and slightly increased for 2027 and 2028. These changes have been incredibly marginal, and the simple reality is that these GDP forecasts are almost never accurate and so don’t really mean much for the average Brit.
There’s also been a slight increase in the government’s ‘Fiscal Headroom’ , a very complicated and somewhat irrelevant number to the wider economy. It’s essentially a measure of how much spending could increase or taxation could decrease before the government would no longer be meeting its targets around the national debt.
These targets are set by the government itself, however, and the only thing they’re really good for is so that Reeves won’t be called a liar in the papers. It’s also almost entirely out of the control of the government and mostly affected by things like the fluctuating cost of the national debt.
The ‘Headroom’ is currently at £23.6 billion, which is an absolute drop in the pond compared to the forecasted expenditure this year of £1.4 trillion, and we’re still very much in a position where this ‘buffer’ could be entirely wiped out by even a small economic shock.
The Bad News
The good and okay news have largely come in the form of economic measures that don’t really have any bearing on your day-to-day life. The bad news comes in one that directly affects us all, however: Unemployment.
It’s now expected to peak at 5.3% this year, and a particular concern highlighted by the OBR was the difficulty first-time entrants to the workforce were experiencing in trying to find a job.
This is especially frustrating for students and young people, as the government appears basically indifferent about rising youth unemployment and the threat to entry-level jobs in a wide variety of sectors. The message today is clear: The immense difficulty for young people finding jobs isn’t getting better any time soon.
For English students as well, the statement offers no measures or even any indications that government support for the student debt crisis is coming. And then there’s the spectre of the potential economic damage from the rapidly-widening war in the Middle East, which, although we have no idea what its possible impacts could be, they’re almost certain to be negative for the UK economy.
The statement provides virtually nothing to offset these concerns, and it appears as though, despite the promises of the government, the future of the economy appears very uncertain indeed.
What this all means
Perhaps the worst thing about this statement is that it doesn’t really promise anything new or any sort of future vision. The Labour government has become incredibly unpopular because of the state of the UK economy, and all Chancellor Reeves has done today is come out and confirmed that, yes, this is apparently all going according to plan.
That ‘Plan’ is marginally reduced debt and slightly increased incomes; the simple reality is that this statement contains virtually nothing for the millions of Britons who are discontent with our economic state and are wondering when things will get better.
What we were told today was that things would be getting slightly better by the time of the next election, but that was before a massive Middle-Eastern conflict that the UK seems to be getting increasingly involved in, and that could have major implications for inflation and government spending.
Reform and the Green Party will also be absolutely overjoyed to hear that, even after a disastrous by-election loss, Labour seem to be going full steam ahead on their sustained-decline agenda.
Britain is in an economic crisis, and the Spring Statement merely reaffirms what we’ve been hearing from this government for the past year and a half: That at least things won’t be getting worse.
On a day where the Greens have overtaken Labour in the polls, this statement seems especially weak. The UK populace seems very much tired of this being all that their government has to offer them.
Featured Image Credit: UK Parliament via Wikimedia commons
1st year Journalism and History Student
I have no accolades but I write okay, I think.
