Growth forecasts lowered – but Reeves insists plan is working

Chancellor Rachel Reeves has delivered her update on the state of the UK economy against the backdrop of growing conflict in the Middle East that is set to send energy prices soaring and create more market uncertainty.

The estimate for the country’s economic growth has been lowered for this year, but the Chancellor insisted her financial plan is working.

In line with her commitment to only hold one fiscal event per year, she did not announce any new tax changes in the Spring Forecast.

However, the statement included downgraded OBR forecasts for growth in 2026 from 1.4 per cent to 1.1 per cent, growing slightly slower in 2026, and faster in 2027 and 2028.

She told the Commons: “This government has the right economic plan for our country” and said it had restored economic stability in an “uncertain” world.

She added: “The new forecasts from the Office for Budget Responsibility confirm that our plan is the right one – inflation is down, borrowing is down, living standards are up and the economy is growing.”

The OBR says unemployment will peak at 5.3 percent this year and then fall gradually to 4.1 per cent by 2030. It also says the two per cent target on inflation will be met later this year.

The forecasts do not take into account any potential impact from events in the Middle East – but the OBR warns it “could have very significant impacts on the global and UK economies”.

The Chancellor said that she was poised to set out “three major choices that will determine the course of our economy into the future”.

There may have been no new tax changes but we already have a number of known changes in motion; the freezing of income tax thresholds until 2031, the restrictions to salary sacrifice in 2029, increases in savings and investment taxes from April 2026, and the reduction of cash ISA to 12,000 from April 2027.

Meanwhile, don’t confuse the lack of changes in policy (this time) for stability. The problems of youth unemployment, and the pressure from high taxes is likely to weigh down the growth potential for some years to come.

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