The Chancellor’s Spring Statement will do little to reduce debt and drive economic growth

Dr John Ball

The Chancellor’s Spring Statement was in places vague, confused, lacked clarity and will do extraordinarily little to meet the government’s dual targets of the “priority” to reduce net debt and drive economic growth.

Some interesting accounting has resulted in a £9 billion ‘headroom,’ the source of which remained unspecified – an interesting figure, given the announcement only yesterday that this is the cost of a new Thames tunnel.

The Chancellor started with the age-old fantasy that a balanced budget is achievable, reached by 2029/30, starting with a budget deficit of £38billion in 2025/26 and £13billion in 2026/27.

Smoke and mirrors

Then the forecast becomes a mix of smoke and mirrors. Announced at the same time, the budget moves into surplus in 2027/28 and results in a surplus of £9.9billion in 2029/30. Not just a balanced budget, but a surplus! Just how this is possible with a current deficit of £131billion, equal to 5% of GDP and the seventeenth largest in a century, was not explained.

The most interesting – and strangest – part of the announcement was the reduction in net financial debt (aka The National Debt) to 83% of GDP in 2025/26, falling eventually to 83% in 2029/30, providing £15.1billion in ‘headroom, ‘or money to spend.

In December 2024, the UK’s net financial debt stood at £2.7trillion or 98% of GDP; just how this will reduce by 15%, or £400billion in one year, is not explained.

Debt

For a government with a clear and unambiguous commitment to reduce debt, the spending plans make even more interesting reading. The plan to spend the equivalent of 2.5% of GDP on defence will cost £50billion per year, eventually rising to £60billion. Aside from the numbers, such spending will not only drive growth but make the UK a “hub for global innovation.”

Ignoring the moral reality, investment in defence industries has been severely lacking, for a great deal of time, often resulting in the UK armed forces purchasing equipment from elsewhere, notably the United States. The skills required simply don’t exist.

A “Transformation Fund” of £3.25billion has been set aside to deliver reforms in the public service, a redundancy scheme and ‘pioneer’ AI in tools to modernise the state.

In a further jumble of unsupported data, this will – amongst other, unspecified schemes – help to deliver £3.5billion savings by 2029/30 and a further unspecified £6.1billion in day-to-day savings.

Statistics

Putting aside the questionable statistics, the part of the Spring Statement that has caused the most interest is the announcement of reductions in welfare spending of £4.8billion, funded by changes both in payments and qualification.

Welfare is a “broken system,” and the government’s approach is simply to reduce the cost.

This announcement will have a particular impact in Wales. where almost 300,000 individuals, or a quarter of all households, are wholly or partly dependent on universal credit.

Unsurprisingly the government in Westminster and for that matter in Cardiff yet again miss the point.

The only way to reduce debt, restore welfare and drive the economy is to understand that a serious, long term policy to build the economy is the only answer.

Spring Statement and Annual Budgets make for good knock about politics and press stories, but do nothing to improve the economy, and all that results from it.