The Office for Budget Responsibility (OBR) forecasts that UK households will be an average of £500 better off by 2029 compared to its autumn projections.
The economy is also expected to grow slightly faster than previously predicted, with GDP projected to reach 9.5% by 2029, up from 9.2%.
Defence Spending Boost
The defence budget will increase by £2.2 billion in 2025-26, bringing total additional defence spending since the Autumn Budget to over £5 billion. The funding will accelerate the deployment of Directed Energy Weapons on Royal Navy ships, modernise HM Naval Base Portsmouth, and improve military housing.
A minimum of 10% of equipment spending will be ringfenced for emerging technologies, including drones, AI, and autonomous systems. A new Defence Innovation Unit will fast-track procurement, while reforms aim to streamline military acquisitions. The government estimates these measures could add 0.3% to long-term GDP—equivalent to £11 billion in today’s terms.
Northern Ireland Funding
Northern Ireland will receive an additional £14 million in Barnett consequentials for 2025-26, on top of its £18.2 billion budget settlement—the largest real-terms devolution allocation to date. The Executive’s per-person funding remains over 24% higher than equivalent UK-wide spending.
A separate £235 million package has been allocated to transform public services, including £61 million for expanded GP teams and funding for education, justice, and infrastructure projects.
Economic Growth Measures
The OBR estimates that sustained government policies could raise real GDP by 0.6% by 2034-25. An extra £13 billion in capital investment over this Parliament—adding to the £100 billion pledged last autumn—aims to spur private sector growth.
Public Sector Reform
A £3.25 billion Transformation Fund will support public service reforms, including AI adoption and digital modernisation. In Northern Ireland, £129 million of previously announced funding has been allocated to health, education, and justice initiatives.
Welfare and Employment
The government plans to overhaul the welfare system to focus on workforce participation, though specific measures were not detailed in the statement.
Next Steps
Final spending plans for 2026-27 onwards will be confirmed in the June 2025 Spending Review.
REACTION
East Midlands Chamber Director of Policy and Insight Richard Blackmore said:
“The projections the Chancellor outlined for how GDP is expected to shape up are a little underwhelming, and with the country’s growth forecast having been halved, the numbers aren’t that inspiring.
“Significant defence investment will add to the overall economy, and for areas like Derby to receive spending in defence technology and engineering will benefit the city, surrounding areas and supply chains so that’s welcome, but the industrial strategy must be all-encompassing and prioritise all sectors.
“While there was talk of spending on new technical colleges across the country, the current provision from FE colleges in the East Midlands should be bolstered by investment first.
“Our recently published Quarterly Economic Survey revealed corporate taxation to be the number one concern of East Midlands businesses but from next month we’ll be in a position to assess any change to the impact on firms from things like higher National Insurance contributions. As for investment, all eyes will now be on the government’s comprehensive spending review, where measures supportive of business are essential in order to enable growth.”
Commenting on the Chancellor’s pledge in the Budget to “significantly reduce the costs of running government” by making cuts to the civil service,Anja Beriro, Partner in the government team at UK and Ireland law firm Browne Jacobson, said: “While governments come and go, the civil service is a fixed asset that steers forward national objectives.
“Therefore, a proposal to cut civil servant jobs – while understandably part of an ambition to make the state leaner – risks the loss of significant brain power and momentum behind delivering on its five missions for this parliament, unless certain issues are considered and acted upon.
“It highlights the importance of ensuring protocols are in place to protect know-how and expertise within the state apparatus from the peaks and troughs of its workforce size, particularly if schemes like voluntary redundancy appeal to civil servants closer to the end of their careers.
“Data collection and AI systems may require upgrading to enable expertise to be shared between departments, which would also help to drive efficiencies.
“But there’s also a need for improved workforce planning, with training and development at its heart, to develop the next generation of civil service leaders.
“From an employment law perspective, any job cuts must be executed very carefully so that they don’t lead to knock-on legal issues for retained employees or for the relevant department.”
Dr Jonathan Carr-West, Chief Executive, Local Government Information Unit (LGIU), said:
“Today’s Spring Statement was largely concerned with macroeconomic issues – the top notes of which focused on defence, welfare and public sector reform. But, at LGIU, we know that much of what was announced today will have a potentially significant impact on local authorities and the communities they serve.
The halving of the health-related part of universal credit was already known, but the fact that this reduced provision will then be frozen for the rest of the parliamentary term is news. A large number of the most vulnerable people in our communities will be impacted by these cuts – the DWP estimates up to 3.2 million families. Inevitably – it will be councils that will have to find the resources to support them and pick up the pieces, putting further strain on already stretched council budgets.
However, there were some bright spots for councils. Several areas and local authorities will receive boosts to their local economies – thanks to the large increase in defence spending. This is to be hugely welcomed for those regions. Likewise the OBR’s projection that we are on track for 1.3 million of the promised 1.5 million houses by the end of the parliamentary term is very positive news.
Housing, planning and skills are foundational for local government, so it was good to hear them feature prominently in the Chancellor’s speech. However, it was not clear how central councils actually are in the Chancellor’s plans for delivery, which is very concerning. These are policies that can only be successful if they are designed and delivered to fit local circumstances and that can only be done in partnership with local government.
From a local government perspective – the elephant in the room today was the fact that the shape of local governance is changing and changing fast with the introduction of mayoral strategic authorities and local government reorganisation. There was no indication anywhere in today’s Statement of a connection between the measures announced and the proposals – already well in train – for devolution and reorganisation.
The Chancellor left a great many questions deferred for local government – with councils left waiting for the answers.”
