On Wednesday 26th March, the Spring Statement 2025 was announced by Chancellor of the Exchequer, Rachel Reeves.
Significant welfare cuts have been announced, as well as an increase in pension credit, a crack down on tax evasion, and an effort to invest in more affordable housing. But, what does this mean for you and your finances? Keep reading for a summary of the key points.
Welfare Cuts
Earlier in March, the Office for Budget Responsibility (OBR) found that welfare spending cuts would save £4.8 billion after ‘final adjustments’ made by the government. In her Spring Statement, Rachel Reeves announced a £3.4 billion net cut to the welfare budget, and went on to say:
- The universal credit health element will be cut by 50% and frozen for new claimants.
- The universal credit standard allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30.
- Real household disposable income per person is expected to grow by an average of approximately 0.5 percentage points per year (equivalent to over £500 a year), from 2025-26 to 2029-30, as a result of an increase in the national living wage and a decrease in inflation expected later in the forecast period.
- Around 800,000 PIP (Personal Independence Payments) claimants are due to see benefit cuts as the government introduces stricter eligibility criteria.
Taxes
The Spring Statement for 2025 does not contain any further tax increases, but the government will be making efforts to crack down on tax evasion to save in this area. These plans include increasing charges for tax evaders by 20% per year.
National Living Wage
The national living wage is remaining the same as Rachel Reeves announced in her 2024 Autumn Budget, and is therefore set to increase by 6.7% to £12.21 per hour (equivalent to £1,400 per year for an eligible full-time worker) in April 2025.
To make pay the same for workers under 21 years old, there will be a single-adult rate introduced gradually.
Pensions
Once again remaining in line with Ms Reeves’ 2024 Autumn Budget, the state pension triple lock will increase by 4.1% in April 2025 – setting the full state pension at an average of £230.25 per week, or £11,973 per year for the 2025/26 tax year.
Pension credit will also increase by 4.1% this year.
Housing
Ms Reeves went on to announce that £2 billion will be invested in the construction of more social and affordable homes over the next 5 years. She forecasts:
- 305,000 homes will be built per year by the end of the forecast period.
- Over 1.3 million homes will be built in the UK over the next 5 years.
The OBR has also concluded that the Labour government’s reforms will lead to house building reaching a 40-year high. But, to build these homes, the Chancellor of the Exchequer added that “people with the right skills will be needed”.
Therefore, the education secretary has announced that more than £600 million will be invested in training up 60,000 more construction workers and 10 new technical excellence colleges across every region of the country will also receive more funding.
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That rounds up our summary of the Spring Statement 2025. As the cost of living continues to leave the UK with growing money worries, dealing with debt can leave those who are struggling feeling even more overwhelmed.
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