Spring Statement live updates: Rachel Reeves to unveil brutal welfare cuts as poll reveals damning verdict on Labour's handling of economy

Sir Keir Starmer and Rachel Reeves have both highlighted a ‘changing world’ in advance of the Spring Statement, which is anticipated to be a challenging day for the Government.

In statements made on social media this morning, the Prime Minister stated: ‘In an era of global transformation, we will ensure security for working individuals and revitalization for Britain.’

Prior to that, Ms. Reeves commented: ‘Security for working people and renewal for our nation. That is our objective. And in a changing global landscape, we will deliver.’

Last night, she attributed global challenges to the British economy’s faltering performance during her tenure.

‘We can observe that the world is evolving, and a component of that evolution is the worldwide increase in government borrowing costs – and Britain has not been exempt from these difficulties,’ she added.

In a welcome development for Rachel Reeves before her Spring Statement, headline CPI inflation decreased to 2.8% in February, down from 3% in January.

This figure was slightly more favorable than the 2.9% anticipated by analysts, although it remains significantly above the Bank of England’s 2% target.

Core inflation, which excludes volatile components such as energy, food, alcohol, and tobacco, also edged down from an annual rate of 3.7% to 3.5%.

The Pound Sterling experienced an immediate decline against the US dollar as traders factored in a higher likelihood of the Bank of England reducing the base interest rate at its upcoming meeting in May.

The benchmark interest rate was maintained at 4.5% last week, despite increasing concerns about the economic slowdown.

However, some economists cautioned that the inflation data could represent a ‘false positive,’ and projected increases in energy costs and national insurance contributions for businesses are expected to push inflation ‘dangerously close to 4% in the near future’.

The Chancellor established a new set of fiscal rules to govern Treasury spending and taxation.

These rules mandate that the current budget should aim for balance or surplus by the fiscal year 2029/30, net financial debt should decrease within the same timeframe, and certain categories of welfare spending will be subject to caps.

Following the Budget announcement, she allocated approximately £10 billion of contingency against these rules, which was less than the Office for Budget Responsibility’s (OBR) projection of around £15 billion.

Since then, geopolitical uncertainties and increasing gilt yields have brought Reeves’ fiscal rules under scrutiny, significantly reducing her financial flexibility.

Government borrowing last month exceeded expectations. OBR statistics indicate borrowing at £10.7 billion, surpassing the forecasted £6.5 billion, thereby diminishing the Chancellor’s anticipated fiscal maneuverability.

Economists at ING anticipate that the Treasury has likely depleted its fiscal headroom due to increased borrowing costs, suggesting that spending cuts will be necessary to adhere to fiscal rules.

Simultaneously, inflation and gilt yields, representing the interest on new debt, have both increased. Some experts now predict that the Bank of England will maintain higher interest rates for a prolonged period to counter elevated inflation, which is again above the central bank’s 2% target.

These factors will inflate government borrowing expenses, making it more challenging for Reeves to comply with her fiscal rules.

Rachel Reeves will finalize her Spring Statement at Number 11 Downing Street this morning before presenting it in the House of Commons this afternoon.

The Chancellor is expected to address Parliament at 12:30 PM, following Prime Minister’s Questions which commences at noon.

At 2:30 PM, the Office for Budget Responsibility (OBR) will conduct a press briefing where it is anticipated that economic growth forecasts may be reduced by half to around 1% for the current year. Furthermore, warnings about stagnant living standards for the remainder of the decade are expected.

Subsequently, at 4:15 PM, Reeves will host a press conference at Downing Street to elaborate on her statement and respond to questions.

We will provide continuous live updates throughout the day, along with expert reaction and analysis.

Defence Secretary John Healey indicated that Rachel Reeves will present a ‘tough’ statement ‘in difficult times,’ seemingly confirming that further reductions in welfare spending will be necessary.

The Chancellor is expected to announce additional welfare cuts after pledging a £2.2 billion increase in defense expenditure, a move that has caused discontent among Labour MPs and supporters.

When questioned about how Labour voters might perceive her Spring Statement, Mr. Healey told BBC Radio 4’s Today program:

It will be a tough, strong statement in tough times. The Chancellor will set out this afternoon that the world is changing, our task is to secure Britain’s future and that’s why she is making an extra £2.2 billion available for defense.

Reports suggest the Office for Budget Responsibility has concluded that the proposed measures will reduce expenditure by £3.4 billion. Rachel Reeves is also expected to announce further actions to save an additional £500 million.

Mr. Healey informed Times Radio:

That’s a calculation we may see confirmed by the Office for Budget Responsibility about the longer-term savings that our plans to change the welfare system may bring.

Rachel Reeves has encountered a significant setback prior to her Spring Statement today, as the Treasury’s independent watchdog disputed her claimed savings from benefit reforms.

The OBR reportedly dismissed the government’s estimate that proposed reforms to work and disability benefits could reduce costs by £5 billion.

Instead, they have assessed these savings to be closer to £3 billion, prompting a last-minute effort to identify further cuts despite growing opposition from Labour MPs. It is understood that an additional £500 million is being cut from welfare, with the remainder sourced from other areas.

In total, Ms. Reeves is believed to be facing a £15 billion shortfall in public finances to address in her Commons address at lunchtime. This financial gap has emerged due to the slowing economy and increasing debt servicing costs, undermining her ambitious tax-and-spend Autumn Budget plans.

Further details from MailOnline’s Political Editor James Tapsfield are available here:

Typically, the Spring Statement serves as an update on the OBR’s forecasts without introducing new policy measures.

However, a series of announcements have already been made leading up to Wednesday as Reeves aims to balance the national accounts.

Over the weekend, Reeves stated to the BBC that she had dismissed ‘tax and spend policies,’ indicating no increases in taxes or government expenditure are planned.

Leading up to the statement, the Chancellor has:

• Asserted that the UK has ‘not been immune’ to ‘global increases in government borrowing costs’.
• Maintained that ‘economic stability is non-negotiable’ and affirmed she will ‘never take risks with public finances’.
• Confirmed plans to instruct Whitehall departments to reduce administrative budgets by 15%, projected to yield £2.2 billion annually by 2029-30.
• Declared £2 billion of funding for social and affordable housing initiatives in England.
• Committed to training tens of thousands of construction workers to aid in delivering the promised 1.5 million new homes across England before the next general election.

The Chancellor had previously committed to delivering a single annual budget in the autumn, with the Spring Statement intended as an economic update.

However, evolving economic and geopolitical conditions have effectively eliminated Reeves’ fiscal flexibility.

The Treasury has already enacted extensive cuts to compensate for fiscal headroom diminished by increased debt interest forecasts.

Read our preview from This Is Money reporter Angharad Carrick:

Welcome to MailOnline and This Is Money’s live coverage of the Spring Statement as Rachel Reeves announces spending cuts aimed at balancing the national budget.

The Chancellor is expected to release official forecasts this afternoon, revealing that the outlook for economic growth has been halved to approximately 1%.

Following her controversial tax-raising Budget in October, the Office for Budget Responsibility (OBR) is also anticipated to caution that living standards are projected to stagnate throughout the current decade.

These pessimistic forecasts position Ms. Reeves to potentially breach her own ‘fiscal rules’ and introduce £15 billion in cuts, potentially inciting a Labour party backlash concerning austerity measures.

Stay tuned as we deliver up-to-the-minute news, reactions, and in-depth analysis from our reporters in Westminster and the This Is Money team.