Watchdog slashes UK growth forecast for 2025 but upgrades it for rest of parliament, chancellor says

The Office for Budget Responsibility has halved the UK growth forecast for 2025 from 2% to 1%, Chancellor Rachel Reeves has said.

However, the fiscal watchdog said that while growth has been downgraded for this year, it had been upgraded for every year after for the rest of this parliament - which is due to end in 2029.

The chancellor said she is "not satisfied with the numbers" for this year as she delivered her long-awaited spring statement in the House of Commons this afternoon.

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But, she explained, the OBR has forecast growth to hit 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.

She told MPs: "There are no shortcuts to economic growth. It will take long-term decisions. It will take hard yards. It will take time for the reforms we are introducing to be felt in the every day economy.

"It is right that the Office for Budget Responsibility consider the evidence and look carefully at measures before recognising a growth impact in their forecast."

The chancellor pointed to changes to the National Planning Policy Framework, saying mandatory housing targets and bringing "grey belt" land into scope for development will "permanently increase the level of real GDP by 0.2% by 2029-30".

This will bring an "additional £6.8bn in our economy and by 0.4% of GDP within the next 10 years", she said.

Ms Reeves also highlighted reforms to the pension system and a national wealth fund, adding it was part of a "serious plan" for economic growth.

Also announced in the spring statement today:

• The budget will move from a deficit of £36.1bn in 2025/26 and £13.4bn in 2026/27, to a surplus of £6bn in 2027/28, £7.1bn in 2028/29 and £9.9bn in 2029/30;
• The Office for Budget Responsibility estimates Labour's cuts to the welfare budget will save £4.8bn, with changes going further than initially thought;
• Reeves says the health element of universal credit will be cut by half and frozen for new claimants;
• There are no more tax rises today, but the chancellor claims she'll raise an extra billion pounds by cracking down more on tax evasion;
• Day-to-day spending will be protected, other than the aid budget, with spending increasing above inflation every year;
• The defence budget will get a £2.2bn boost for next year, paving the way for spending eventually hitting 2.5% of GDP;
• House building will hit a 40-year-high thanks to Labour's planning reforms.

The chancellor also confirmed that a voluntary redundancy scheme is set to launch for civil servants as part of her mission to "make government leaner". She said this will deliver £3.5bn in "day-to-day savings by 2029-30".

Shortly afterwards, shadow chancellor Mel Stride accused Ms Reeves of being a "gambler with half-fiddled fiscal targets" and said she left "way too little headroom".

He accused the government of having "no plan" for the economy. "We have gone from incompetence to chaos," he said.

"The result is the worst of all worlds."