‘Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness.
Annual income twenty pounds, annual expenditure twenty pounds, nought and six, result misery’.
Mr Micawber, Charles Dickens – David Copperfield
175 years after Dicken’s wrote David Copperfield, the Chancellor, Rachel Reeves delivered a similar assessment of the UK’s current finances in yesterday’s Spring Statement.
In the October 2024 Budget, the Chancellor had headroom of £9.9bn against her self-imposed, ‘non -negotiable’ fiscal rule that day to day government spending should be in line with tax receipts by 2029/30. Since then, blown off course by lower than expected tax revenues, increased UK borrowing costs and a tariff-ically uncertain global economy, the Chancellor announced a £6bn cut in government spending to restore the £9.9bn headroom by the end of Labour’s current term.
And with the imminent £40bn of tax increases from the October 2024 Budget about to bite from April onwards on businesses and individuals, the Office for Budget Responsibility’s (OBR) updated assessment of the UK economy and forecast for the coming years, had a similar Dickensian vibe.
UK economic growth for 2025 is forecast to be halved from 2% to 1% and average1.75% p.a. for the rest of this decade. This is about the average for the last couple of decades but below the UK’s longer term historic average annual economic growth rate of 2-2.5%. The OBR also forecast the tax take as a share of UK GDP will rise from currently 35.3% for this year to hit a historic high of 37.7% by 2027/28 and remain at a high level, whilst adding generally to its forecasts that significant risks remain, domestically and globally, which could knock the Chancellor’s plans off course again. The UK stock and government bond markets remained largely unmoved.
The Chancellor signposted ahead of the Spring Statement that no new tax raising measures would be announced, leaving this harbinger to the Autumn 2025 Budget. In the meantime, the Chancellor and the Government, whose promise is ‘to get the UK growing again’, must be hoping on a slice of Mr Micawber’s famed optimism….that something turns up!
For now, no specific wealth planning actions arise from the Spring Statement … other than hoping the Government’s plans stay on course during this year, to reduce the odds of further tax rises in the Autumn Budget.
The finer details of the Spring Statement 2025 can be found HERE.
This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action.
