As anticipated, the Spring Statement 2025 contained more than just updated fiscal forecasts from the Office for Budget Responsibility (OBR). The Chancellor announced or confirmed a series of spending decisions to offset a deterioration in the economic and fiscal outlook prepared by the OBR. 

Our chart illustrates this by looking at how the projected current budget surplus for 2029/30, the fifth and final year of the forecast period, has changed since the forecasts prepared at the time of the Autumn Budget 2024. This is a key year for the fiscal forecast, as the Chancellor’s primary fiscal rule is to run a current budget surplus in the fifth year of the fiscal forecast.

Last time’s projected current budget surplus of £10bn in 2029/30 was revised down by £14bn to a projected current budget deficit of £4bn, driven by £2bn in lower tax receipts from a weaker economic outlook, £10bn from higher interest rates, and £2bn in other forecast revisions.

The higher interest rate effect of £10bn comprises £1bn from the effect of a slightly higher inflation assumption on inflation-linked debt, £4bn from a slightly higher assumption for short-term interest rates, and £5bn from higher yields payable on government gilts as debt is refinanced over the forecast period. 

The result is a £13bn increase in the projected fiscal deficit in 2029/30 from £71bn to £84bn, comprising the £14bn adverse change in the current budget balance less a £1bn revision to public sector net investment from £81bn to £80bn.

In order to restore her headroom of £10bn against her primary fiscal rule, the Chancellor announced a series of policy decisions to improve the fiscal position. First, there is £5bn in extra tax receipts in 2029/30, comprising £2bn from doing more to tackle tax avoidance and evasion and £3bn from the indirect benefits of other decisions, including planning reform. Second, there are £11bn in spending cuts, reflecting £5bn in planned cuts to welfare from reforming disability and sickness benefits, £3bn from cutting current spending on overseas development, and £3bn from cutting the administration costs, primarily from reducing the size of the civil service. There is also £2bn in spending increases, including just under £1bn in employment support connected with the government’s welfare reforms, and £0.6bn in higher defence spending.

Together these steps return the current budget surplus to £10bn, providing the Chancellor with a small safety margin against her primary fiscal rule ahead of the Autumn Budget 2025 later this year.

The chart also shows how government policy decisions in the Spring Statement 2025 have increased public sector net investment by a net £4bn to £84bn. These comprise a £6bn increase in defence investment and £2bn in extra capital investment in other areas, less a £4bn reduction in the overseas development capital budget.

For more detail on the changes to the OBR’s forecasts and the Chancellor’s response, read our article on the fiscal implications of the Spring Statement 2024. Or visit ICAEW’s Spring Statement 2025 hub to read our wider coverage on the implications of this fiscal ‘non-event’.