Budget 2025 latest: Inflation drop brings boost for Rachel Reeves ahead of spring statement

Chancellor Rachel Reeves will deliver her first spring statement today, setting out her economic plans for the UK.

With spending cuts, potential tax changes, and shifts in government priorities on the table, this announcement will have a significant impact on households and businesses alike.

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Responding to the inflation figures, Treasury Chief Secretary Darren Jones said: “Our number one mission is kickstarting growth to raise living standards for working people, that is why we are protecting working people’s payslips from higher taxes.

“In a changing world, we’re focused on delivering economic stability to secure people’s finances – freezing fuel duty, protecting the triple lock and increasing the national living wage by £1,400 a year for full-time workers, while going further and faster to drive growth through our plan for change. ”

The rate of Consumer Prices Index inflation fell to 2.8 per cent in February from 3 per cent in January, the Office for National Statistics said.

The latest ONS figures come on the same day chancellor Rachel Reeves delivers her spring statement where she is expected to announce spending cuts across government departments.

Signs of easing inflation will come as good news to Ms Reeves amid efforts to reduce the cost of living.

Rachel Reeves will deliver the Spring Statement on Wednesday 26 March at around 12.30pm.

Before the statement, the Office for Budget Responsibility (OBR) will publish its forecast on the UK economy.

The OBR’s forecast on 26 March will also provide estimates on the cost of living for households, and how well it thinks the government will maintain its self-imposed fiscal rules.

The chancellor will then present the main findings to parliament, delivering her plans for the economy alongside this. The opposition will be given the first response, which will likely come from Conservative leader Kemi Badenoch or shadow chancellor Mel Stride.

The Treasury has not shared details of what will be in the Spring Statement, but economists have begun making predictions of what is most likely.

It has been understood that Ms Reeves will announce major cuts on 26 March, which could amount to billions across several Whitehall departments. There could be as much as 7 per cent taken from the budgets of some departments over the next four years, The Guardian reports.

There has also been speculation that the chancellor may look to effectively increase taxation through extending the freeze on income tax thresholds beyond the current 2028/29 end point. Since 2021, the personal allowance has been frozen at £12,570, with the basic, higher and additional rate also staying at the same level.

The effect of this is what economists call “fiscal drag,” where more people are pulled into higher tax brackets as their earnings increase, but the thresholds stay the same.

The chancellor may also take the Spring Statement as an opportunity to clarify how international aid spending will be reallocated to defence, following Labour’s decision to boost defence spending to 2.5 per cent by 2027.

One of Britain’s leading economists has warned a wealth tax would be almost impossible to implement, despite growing support for the policy in the wake of the benefits cuts unveiled by the government last week.

Paul Johnson, the director of the Institute for Fiscal Studies (IFS), warned that “no country in the world has ever successfully had a wealth tax that’s raised serious money”, saying the levy poses significant administrative problems.

It comes as new polling shows the British public overwhelmingly support such a tax, while a growing number of Labour MPs have urged the government to introduce it instead of making spending cuts.

The EU “cares more about fish than Europe’s collective defence”, a former leading adviser on Brexit told Parliament.

Lord Jackson of Peterborough, who was chief of staff for David Davis as Brexit secretary, slammed the EU for apparently insisting on securing a deal on access to British fishing waters ahead of any defence agreement.

The Conservative peer said: “The EU has apparently taken the decision to shut the UK out of their 150 billion euro defence (£126 billion) fund unless we acquiesce on a new fishing agreement.

“Clearly the Macron administration and the EU seem to care more about fish than our collective defence.”

The latest saga threatens to reignite the freebies row that engulfed the government last year after a number of cabinet ministers, including the prime minister, accepted tickets to the Taylor Swift Era’s tour, at a total value of more than £23,000.

Have your say: The chancellor’s spring statement is just around the corner, bringing with it new concerns about the future of living standards in the UK