Delivering the Spring Statement today, Rachel Reeves said stability was the “single-most important precondition for economic growth”, which was why she committed to one single, major fiscal event per year, with policy changes reserved for the Autumn Budget.
She said the Office for Budget Responsibility’s (OBR’s) report showed that the government’s plan “was the right one”.
“Inflation is down. Borrowing is down. Living standards are up and the economy is growing,” she added.
Average growth across the forecast period is largely unchanged, Reeves said, adding that the OBR had adjusted the profile of gross domestic product (GDP) to say it would grow “slightly slower in 2026 and then faster in both 2027 and 2028”.
“So, GDP is forecast to grow by 1.1% in 2026, 1.6% in both 2027 and 2028 and 1.5% in both 2029 and 2030,” Reeves said, adding that GDP per person would grow faster than expected.
She said that after adjusting for inflation, people would be £1,000 better off per year by the next general election.
The OBR said this was 0.3 percentage points lower than forecast in November, due to weaker-than-expected GDP at the end of last year. It said the “weakness is cyclical” and based on historical forecast errors, there was a one-in-five chance that growth in 2026 could be higher than 3%, but also a similar chance it could be lower than a 0.75% contraction.
Inflation to hit 2% target next year
The OBR said slowing wage growth contributed to its prediction that CPI inflation would fall from 3.4% in 2025 to 2.3% this year, then 2% from 2027 onwards. The expectation for 2026 is 0.2 percentage points lower than the forecast in November, then broadly similar thereafter.
The report said lower inflation would be driven by “greater slack in the economy” and lower food and energy prices.
The markets also expect the base rate to fall from 3.75% to 3.3% by the end of this year, lower than the November prediction. The base rate will then rise to 4% by 2030.
Reeves said the government had restored economic stability, with six base rate cuts and lower inflation since it came into power.
“Those interest rate cuts will save households over £1,300 per year on a typical new fixed rate mortgage,” Reeves said.
She said the Bank of England confirmed that inflation would fall faster due to measures introduced at the Autumn Budget, reaffirmed by the OBR, which predicted that inflation would decline more rapidly than it previously forecast.
“Keeping inflation low and stable is the best way to support family incomes and reduce pressures on the cost of living,” Reeves said.
