The Chancellor of the Exchequer, Rachel Reeves, this week made her Spring Statement in the House of Commons.
Updating MPs on the government’s economic plans, she made no significant tax or spending announcements, but for people tax planning in Cheshire, Oswestry or elsewhere, it did contain a series of economic projections for the year ahead.
The Office for Budget Responsibility (OBR) is predicting economic growth of 1.1% this year and 1.6% in 2027 and 2028 respectively. Inflation is set to average 2.3% in 2026 before hitting the Treasury’s desired 2% target next year. In terms of public spending, the OBR is waiting for the next Budget before determining whether the Government is on schedule to meet its tax and spending rules. Currently, the amount of financial ‘headroom’ available to the Chancellor, against different criteria, is predicted to rise.
If you have a mortgage, there is also likely to be an increase in interest rates, from 4.1% in 2026 to 4.5% by 2030, whilst housebuilding across the country is forecast to drop to 220,000 this year before bouncing back to 305,000 by the year 2030/31. Following intensive lobbying, the government agreed to soften the impact of inheritance tax on farmers and business rates on pubs and music venues, and these changes are set to cost the Treasury around £200 million in total.
The Chancellor conceded in her speech that official predictions are subject to wider geopolitical pressures, such as the current conflict in the Middle East, meaning that the economic outlook for the UK remains ‘uncertain’.
