Rachel Reeves put on a brave face at the dispatch box — and, credit where it’s due, her Spring Statement delivery was more assured than usual. But confidence and credibility aren’t the same thing.
One glance at the Office for Budget Responsibility’s (OBR) latest projections and the rosy picture starts to crack. Inflation forecasts, unemployment figures, GDP growth, and fiscal headroom all carry asterisks the Chancellor conveniently glossed over. And that’s before you factor in a week that’s already sent global markets into a tailspin.
Here’s what Reeves said — and what she quietly skipped past.
The Growth Picture Isn’t Pretty
Reeves flagged a small upgrade to GDP growth projections for later in the parliament — but in the same breath neatly skipped past the headline number: 2026 growth has been slashed to barely above 1%.
That’s miserly by any standard. And crucially, that forecast was drawn up before this week’s geopolitical turmoil sent markets into a spin. In short, it was already a weak number before the world started getting messier.
Inflation and Rates: Don’t Pop the Champagne Yet
Reeves was quick to claim credit for falling inflation projections and continued interest rate cuts — both of which, she argued, would ease cost of living pressures.
The OBR itself isn’t so sure. The fiscal watchdog has already conceded that recent events are likely to cast considerable doubt on those forecasts. Skyrocketing energy prices — sparked by the Iran war and the resulting closure of local oil and gas plants — could put inflation back on the menu in the coming months. City analysts have already torn up earlier predictions of a Bank of England rate cut later this month.
So the good news on rates? Hold that thought.
Unemployment Forecasts: Optimistic at Best
The OBR is projecting unemployment to fall to 4.1% over the next year. Sounds encouraging — until you check January’s actual unemployment rate, which already sits at 5.2%, well ahead of the OBR’s own November forecasts.
Fergus Jimenez-England, associate economist at the National Institute of Economic and Social Research (NIESR), put it plainly: the forecast is “markedly optimistic” and “well below the consensus of academic economists.”
Why does this matter? Because overstating employment flatters the fiscal outlook — it inflates projected tax receipts and reduces expected welfare spending. In other words, the numbers look better partly because the jobs forecast is probably too rosy.
Fiscal Headroom: Upgraded, but Fragile
Reeves trumpeted a rise in fiscal headroom, driven by unexpectedly strong tax receipts in January and OBR upward revisions to future receipts. But dig beneath the surface and you find the projections also lean on a £9bn annual upgrade tied to better-than-expected rises in equities.
With the FTSE already down around 5% this week, that assumption looks increasingly shaky. The upgraded headroom may be real on paper — but the foundations are thinner than the headlines suggest.
Any Silver Linings?
Actually, yes — one. On previous budget days, Reeves has had a habit of starting to tax the moment she gets to the dispatch box. This time? No new levies. That’s a genuine relief, even if it’s a fairly low bar to clear.
And in the broader political context, markets appear to be operating on a “better the devil you know” basis. Reeves and Starmer may have fewer City supporters than they started with — but last month’s near-death experience for the occupants of Downing Street, and the gilt market volatility it sparked, served as a reminder. Should they be forced out, a more radical, left-wing alternative is waiting in the wings.
For now, the consensus holds. That’s not much to celebrate — but it’s something.
The Takeaway
This Spring Statement won’t go down as a turning point. The OBR’s projections carry significant upside-risk assumptions — on employment, equities, and a geopolitical backdrop that’s already shifted. Reeves delivered her message with composure, but the numbers tell a more sobering story.
FAQ: Reeves’ Spring Statement 2026
Q1: What did Rachel Reeves announce in the Spring Statement 2026?
A: Reeves focused on falling inflation projections, continued interest rate cuts, and an upgraded fiscal headroom driven by stronger-than-expected January tax receipts. She also highlighted a small upward revision to GDP growth projections for later in the parliament, while downplaying the 2026 growth downgrade to barely above 1%.
Q2: What is the OBR’s unemployment forecast for 2026?
A: The OBR forecasts unemployment falling to 4.1% over the next year. However, January’s actual rate was already 5.2%, and NIESR economists have described the projection as “markedly optimistic” compared with the academic consensus.
Q3: Were any new taxes announced in the Spring Statement?
A: No new taxes were announced — a notable departure from previous fiscal events where new levies were often introduced. This was widely seen as a small but genuine point of relief for markets and businesses.
Q4: How reliable is the OBR’s fiscal headroom projection?
A: The upgraded fiscal headroom partly relies on a £9bn annual boost from rising equity values. With the FTSE down around 5% this week, that assumption is already looking questionable. The headroom also depends on the OBR’s optimistic unemployment forecast, which many economists dispute.
Q5: What is the UK GDP growth forecast for 2026?
A: The OBR revised 2026 GDP growth down to barely above 1% — a significant cut from earlier projections, and one made before this week’s geopolitical and market turbulence. Analysts expect further downgrades if conditions continue to deteriorate.
DISCLAIMER
Effective Date: 15th July 2025
The information provided on this website is for informational and educational purposes only and reflects the personal opinions of the author(s). It is not intended as financial, investment, tax, or legal advice.
We are not certified financial advisers. None of the content on this website constitutes a recommendation to buy, sell, or hold any financial product, asset, or service. You should not rely on any information provided here to make financial decisions.
We strongly recommend that you:
- Conduct your own research and due diligence
- Consult with a qualified financial adviser or professional before making any investment or financial decisions
While we strive to ensure that all information is accurate and up to date, we make no guarantees about the completeness, reliability, or suitability of any content on this site.
By using this website, you acknowledge and agree that we are not responsible for any financial loss, damage, or decisions made based on the content presented.
