Chancellor Rachel Reeves has delivered her Spring Statement 2025, setting out her plans to reshape the UK economy. With changes to welfare, defence, and civil service spending, this year’s statement feels particularly weighty, and not without controversy. For many Londoners, the key question remains: how will these shifts affect everyday life?
The Spring Statement 2025 made headlines immediately with a series of proposed cuts to incapacity benefits under Universal Credit. From next April, existing claimants will see payments frozen at £97 per week, while younger claimants under 22 will no longer qualify for the top-up. These changes follow news that the Office for Budget Responsibility (OBR) revised projected savings from £5bn down to £3.4bn by 2030.
🔹 Key Welfare Announcements
- Incapacity benefits to be halved for new claimants
- Existing payments frozen at £97/week from April 2026
- Stricter eligibility test for Personal Independence Payments (PIPs) from November 2026
- Those under 22 lose access to the top-up element
The OBR also published new economic forecasts alongside the statement, and while the short-term growth outlook has worsened, there are small signs of optimism in the years ahead.
🔹 UK Growth & Inflation Forecasts
- Growth for 2025 downgraded from 2% to 1%
- Growth expected to improve slightly in 2026–2029
- Inflation expected to average 3.2% this year
- Target of 2% inflation expected to be met by 2027
What perhaps caused the most immediate reaction was the announcement of a £2.2bn increase in defence spending, on top of the £2.9bn already planned. Reeves called this a “down payment” toward reaching the government’s goal of spending 2.5% of national income on defence by 2027. The increase will be funded in part by cutting foreign aid from 0.5% to 0.3% of gross national income, raising eyebrows among NGOs and international development groups.
The boost in funding will be invested in advanced military technologies, such as energy weapons for naval ships, and upgrades to naval bases and accommodation for military families. More detail can be found via the UK Foreign, Commonwealth & Development Office.
🔹 Defence and Overseas Aid
- Defence budget increased by £2.2bn
- Total military spend to hit 2.36% of national income in 2026
- Foreign aid cut to 0.3% of GNI to help fund it
- Upgrades planned for Naval Base Portsmouth and other sites
Another notable point was a push to reduce the cost of running government departments. Reeves has announced a 15% cut in administrative budgets by 2030, meaning 10,000 civil service jobs are likely to go across HR, policy, communications, and office management.
As EyeOnLondon previously explored in our UK growth strategy piece, the UK’s sluggish recovery continues to challenge even the most seasoned economists. And with inflation stubbornly above target, the Spring Statement attempts to present action, albeit controversial, as urgency.
Reeves placed the blame for rising borrowing costs on international factors such as US trade tariffs and ongoing global instability from the war in Ukraine, though some critics suggest Labour’s economic policies are also part of the issue. Government borrowing costs have now risen to almost 4.8% over 10 years, adding further pressure.
🔹 What Else Was Announced?
- Cuts to overseas aid and civil service jobs
- Revised growth forecast for 2025: 1%
- Stricter rules for accessing disability and incapacity benefits
- Reaffirmation of no tax rises in this Spring Statement
For more updates on the Spring Statement 2025 and further insights into how these changes could impact Londoners, visit EyeOnLondon. We’d love to hear your views in the comments.
Follow us on:
Subscribe to our YouTube channel for the latest videos and updates!
We value your thoughts! Share your feedback and help us make EyeOnLondon even better!
