Herts economic expert tells us what the Spring statement could mean going forward
Despite the backlash, the Chancellor defended her approach, emphasising long-term economic recovery over quick fixes
The UK economy is set to grow at just 1% in 2025, down from an earlier forecast of 2%, according to the Office for Budget Responsibility (OBR).
This downgrade follows Chancellor Rachel Reeves’s Spring Statement, which has drawn criticism for its welfare cuts and reductions in departmental spending.
Despite the backlash, Reeves has defended her approach, emphasising long-term economic recovery over quick fixes.
She cited falling interest rates, rising wages, and improved long-term growth forecasts as indicators of progress.
However, Professor Bruno Bonizzi, an economics professor at the University of Hertfordshire, warned that the government’s fiscal constraints could lead to further austerity measures and increased hardship for vulnerable groups.
He said: "The government makes its spending and taxation decisions based on GDP forecasts.
"With lower GDP growth, the amount the government can spend without hitting its borrowing and debt ceiling becomes smaller. This is why we have seen recent welfare cuts."
The government’s plan includes increased defence spending, which it hopes will act as an economic stimulus.
"The government is trying to lead Europe alongside France to boost defence spending," Professor Bonizzi explained. "Defence spending is often capital expenditure, meaning it can potentially drive productivity and innovation."
The impact of trade tensions is another major concern. The OBR cited "lower business and consumer confidence, upward inflationary pressures, and tightening global trade" as key factors in its revised forecast. Recent US-imposed tariffs, particularly on car imports, are fueling economic uncertainty.
"A renewed wave of trade restrictions, such as those implemented by the United States, can provoke retaliation and lead to reduced international trade," Pr Bonizzi noted. "This slows opportunities for UK exports, impacting businesses and households."
While GDP growth forecasts for 2026–2029 have been revised upwards, he cautioned that long-term projections carry significant uncertainty.
"A halving of a short-term growth forecast is more damaging than a projection years ahead," he said.
The Institute for Fiscal Studies (IFS) warned of ongoing uncertainty ahead of the autumn budget, while the Resolution Foundation highlighted the long-term struggles for living standards.
In response to concerns about welfare cuts, Reeves has maintained that tough decisions are necessary to restore fiscal discipline.
However, Bonizzi stressed the human cost of these measures: "The cuts may seem small in proportion to the overall budget, but they have a significant impact on those directly affected. According to a Department for Work and Pensions report, hundreds of thousands could be pushed into poverty."