Chancellor Rachel Reeves halves UK growth estimate for 2025 in her Spring Statement but one Liverpool city region manufacturing boss welcomes planning reforms that will see 1.3m homes built. Tony McDonough reports
UK Chancellor Rachel Reeves downgraded growth forecasts for 2025 in her Spring Statement on Wednesday but upgraded estimates for later in the Parliament.
Ms Reeves told the House of Commons that the growth estimate for this year has halved to 1% from 2% by the Government’s official forecaster, the Office for Budget Responsibility (OBR).
She added she was “not satisfied” with the 2025 projection but added “this is just the start” as she revealed projected GDP growth of 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.
She said the Government would spend 2.5% of GDP on defence by 2027, which will be achieved by reducing overseas aid spending to 0.3% of gross national income. And she confirmed a £2.2bn funding boost for the Ministry of Defence from 2026.
The Chancellor reiterated her pledge to reform the planning system which she claimed was currently “too slow”. Those changes, she insisted “will lead to housebuilding reaching a 40-year high”.
And she predicted the reforms would lead to more than 1.3m new homes being built across the country over the next five years. This will take Labour within “touching distance” of its promise to build 1.5m homes in England this parliament, she said.
This commitment was welcomed by Greg Johnson, managing director of Liverpool city region window and door maker Warwick North West, a major supplier to housebuilders across the region.
Previously Greg had talked about the prospect of a “golden age of housebuilding” and says he’s encouraged by the Chancellor’s commitment to unblock the planning system.
“Myself and other people in the construction industry were a little sceptical about the 1.5m homes pledge but at the same time it is the kind of ambition we need to see from Government,” Greg told LBN.
“Even 1.3m new homes over the life of this parliament would be an impressive achievement and would go a long way to fixing the country’s broken housing market.
“As well as providing new homes, the policy will also potentially offer a huge economic stimulus, creating jobs and prosperity across the entire supply chain and boosting productivity for the economy.
“One question, of course, is do we have the capacity to meet these ambitious targets? So It was encouraging to hear a few days ago the Government plans to invest £600m in construction skills training.
“I’d also be interested to know what kind of construction methods will be used to build these homes. I expect many will be built using traditional methods but it would be good to also see a major investment in homes created using Modern Methods of Construction.”
Ms Reeves said changes to welfare benefits including Personal Independence Payment (Pip) and Universal Credit (UC) would save around £5bn a year by the end of 2030 and get more people into work.
According to Government estimates, 3.2m families will be worse off as a result of the reforms by 2030 while 3.8m families will be better off.
The Government’s entire welfare budget, including old-aged pensions, costs more than £300bn a year and represents almost 25% of all Government spending. Health and disability-related benefits account for £65bn a year, rising to £100bn a year by 2029.
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PIP payments are expected to double to £34bn by 2029/30. Around 1.3m people now claim disability benefits primarily for mental health or behavioural conditions. That represents 44% of all working age claimants, according to the independent economic think-tank, the Institute for Fiscal Studies.
The Chancellor said Labour is abiding by its self-imposed fiscal rules and moving from a deficit of £36.1bn in 2025/26 to a surplus of £9.9bn by 2029/30 – adding that the Treasury will hit its target of bringing in more than it spends “two years ahead of schedule”.
More savings will be gained by reducing the administrative costs of government departments by 15% by 2030. Around 10,000 civil service jobs are expected to go in areas such as HR, policy advice, communications and office management.
In his response to the Spring Statement Liverpool City Region Metro Mayor, Steve Rotheram, said: “This statement shows a Government that’s serious about backing regions like ours to deliver – and I welcome that.
“These aren’t easy times, and the Chancellor’s had to make some tough choices. But protecting investment in housing, skills and infrastructure – the building blocks of a stronger economy – is the right call.”