There were no further surprises for employers in today’s Spring Statement as they prepare for next week’s minimum wage and national insurance increases.
Chancellor Rachel Reeves had already committed to not increasing taxes for employees in this statement, instead increasing employers’ national insurance contributions from 13.8% to 15% from April, as announced in October’s budget.
She said the government had had to take bold decisions, claiming that the legacy of the previous administration meant that there was a need for “an active government, that is not stepping back, but stepping up”, and that Labour was “on the side of working people”.
The Office for Budget Responsibility has halved its 2025 growth estimate for the UK to 1%, but upgraded its longer-term growth estimates from 2026 onwards.
Government spending
Its official fiscal outlook has also predicted that inflation will go up to 3.2% in 2025 (it is currently 2.8%) and then fall “rapidly” to 2.1% in 2026.
One new announcement in today’s statement was an increase in investment in HM Revenue & Customs to crack down on tax evasion.
In October’s budget, Reeves said that the Treasury would clamp down on schemes such as umbrella companies that “exploit workers” by recruiting more staff to HMRC.
Today she announced plans to invest further cash into technology and other resources to increase HMRC’s capacity to tackle tax avoidance, which would raise a further £1 billion for the public purse.
The Treasury said there would be a consultation on measures to “close in on promoters of marketed tax avoidance, whose contrived schemes leave their clients with unexpected tax bills”. There will also be consultation on how HMRC should tackle tax advisors who promote non-compliance.
Reeves also confirmed details of cuts to welfare designed to save £5 billion a year by 2030, including stricter tests for personal independence payments and a freeze on incapacity benefits.
In announcing “final adjustments” to benefits changes, she shared that the Office for Budget Responsibility had confirmed the reform would shave £4.8 billion off the welfare budget.
“If you can work, you should work,” she said. “But if you can’t work, you should be properly supported.”
Reeves had also already revealed plans to reduce government running costs by 15% by the end of the decade, which is likely to see around 10,000 civil servants’ jobs cut.
She told parliament that this, as well as the recent abolition of NHS England, were part of a push to “make our state leaner and more agile, delivering more resources to the front line”.
Outlining plans to invest more public money in defence and infrastructure, Reeves said the government would invest £13 billion more in capital infrastructure over the next five years, launching a construction skills package to train up to 60,000 more skilled workers.
‘Rethink plans’
However, shadow chancellor Mel Stride described the Spring Statement as an “emergency budget”, accusing Reeves of “tanking the economy” and creating the “highest tax burden … in the history of the country”.
TUC general secretary Paul Nowak urged the government to rethink its plans on welfare reform and cuts to the civil service workforce.
He said: “Ministers need to rethink their plans. Decisions that affect millions of people’s lives must be made with care – not as a last-minute response to changed fiscal forecasts.
“Public sector workers are key deliverers of national renewal. But after 14 years of Tory chaos and ruin, many feel burnt out and demoralised.
“It’s vital the government invests in these workers and recognises the key role they play in improving the services we all rely on.
“Any approach to transforming our public services must include clear workforce plans for every part of our public sector, developed in partnership with staff and unions.”
Ronni Zehavi, CEO and co-founder of HR software company HiBob, said that “every British business” had been watching the announcements in the hope of seeing a relief on employer NI contributions.
“With less than two weeks until implementation, employers are now forced to continue making difficult budget decisions, with many reducing hiring, freezing or modifying wages and cutting back on staff investment,” he said.
“The cost of employing people remains the most significant burden on businesses. With new employment obligations set to be rolled out in April to support working Brits, it is crucial the government doesn’t overlook the vital need for assistance to those employing them. Today’s lack of support is another blow, but businesses must remember the value in investing in talent in the long run.”
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