Addressing in the House of Commons as she presents the Spring Statement, Chancellor Rachel Reeves will highlight the government’s dedication to national security and economic stability.
“This government was elected to change our country,” she will say. “To provide security for working people and deliver a decade of national renewal.”
The plan is to tell us about all of Labour’s achievements so far, emphasising the government’s efforts over the past nine months and the result they yielded, including stabilising public finances, supporting the Bank of England in cutting interest rates three times, making record investments in the NHS, and increasing the National Living Wage to benefit three million workers.
The Chancellor of the Exchequer is set to announce a significant increase in defence spending, pledging to deliver “security for working people” and a “decade of national renewal.”
The announcement will outline government plans to invest in advanced weaponry, enhance housing for military families, and drive economic growth through its Plan for Change. However, despite these commitments, British households and businesses remain increasingly pessimistic about the state of the economy—particularly as Chancellor Rachel Reeves faces a £15bn fiscal shortfall.
While defence spending is a key national priority, the economic policies introduced in the Autumn Budget—soon to become law—will have a greater impact on business confidence and the overall strength of the UK economy.
This comes at a time when public confidence in the economy is declining. A KPMG survey found that over half of respondents believe economic conditions are worsening, with only one in ten seeing signs of improvement. The percentage of people who think the economy is heading in the wrong direction has surged to 58%, up from 43% before Christmas.
In response, households are tightening their budgets by cutting back on discretionary spending and increasing their savings, which could further slow economic growth. Many reported dining out less, reducing clothing purchases, and ordering fewer takeaways.
Tax reforms and their impact on businesses and families
The UK’s tax system is changing, and two big topics have been making headlines: the end of the non-domicile tax status and new rules on inheritance tax. The government has replaced the non-domicile regime with the Foreign Income and Gains system, a move that has sparked a lot of debate.
Many wealthy individuals have left the UK, raising concerns about whether the new system will bring in as much money as expected. Reports suggest that over 10,000 millionaires left the UK in 2024—157% more than the year before. At the World Economic Forum in January, Chancellor Rachel Reeves hinted at making the transition period more appealing, but so far, no major updates have been made. That begs the question, will there be any changes in the Spring Statement?
Two key changes to inheritance tax have also caused strong reactions. From April 2026, the tax-free allowance for passing on business or farm property will be capped at £1 million. Anything above this will only get 50% relief, rather than the full 100% as before. Starting in April 2027, pensions will no longer be exempt from inheritance tax. On top of that, withdrawals from inherited pensions could also be taxed as income, meaning some families could face a combined tax rate of 64%.
In a previous conversation with Asian Voice, Neil Davy, CEO of Family Business UK had shared that, “family businesses must have a stable and supportive policy environment that allows them to plan for the long term. It is fundamental in enabling them to draw up a strategy of when and how they can pass ownership to the next generation – either through a planned, phased succession or the death of the owner.
He shared that It’s important that successive governments continue their support and failure to do so could be catastrophic to family businesses across the UK.
He also shared that the reason behind the long-term success of family businesses lies in a stable regulatory and tax environment. It underpins their entire business model and, without it, they are unable to plan and make decisions that allow them to invest for the long term as part of a multi-generational strategy.
Given that many business owners and farmers feel these changes are unfair and harmful to growth, there is speculation that the government may revise the plans, especially following consultations on business and agricultural tax relief. The Spring Statement could provide more clarity on whether any adjustments will be made.
Rising business costs and fiscal uncertainty
The 2% increase in employer National Insurance, announced in the Autumn Budget, will also take effect in April. At the same time, the threshold at which employers begin paying National Insurance will drop from £9,100 to £5,000. While the government claims this change will not directly impact workers’ wages, businesses facing higher costs may respond by limiting pay raises or cutting jobs. Despite concerns about its long-term effects, a reversal of this decision in the Spring Statement appears unlikely.
Chancellor Rachel Reeves has been cautioned against imposing further tax increases on businesses after the Office for Budget Responsibility (OBR) warned that she risks breaching her fiscal rules.
Rupert Soames, chairman of the Confederation of British Industry (CBI), has urged the Chancellor to avoid additional tax burdens on the private sector, arguing that such measures could harm business investment and further weaken economic growth. His warning follows an OBR report indicating that weak growth and rising borrowing costs since October’s Budget have eroded the £9.9bn financial buffer Reeves initially set aside.
Alpesh Paleja, Deputy Chief Economist, CBI also made his point, stating, “It’s clear that businesses are still dealing with the impact of measures announced in October’s Budget. The combination of a rise in employer National Insurance Contributions, a big rise in the National Living Wage, and changes in the Employment Rights Bill have pushed costs higher for companies, and hit business confidence. Our own data suggests that firms are reappraising pay awards, hiring and pricing intentions in response, with labour-intensive sectors such as retail and hospitality particularly affected.
“This comes at a time when economic momentum was already weak, and inflationary pressures were proving stubborn. While we expect some improvement in activity this year, it’s clear that more needs to be done to secure stronger, more sustainable growth over the longer term. This summer’s Spending Review offers a key opportunity to boost growth prospects, using targeted innovation and policy and regulatory reforms to accelerate investment in the economy.”
The Spring Statement, announced after Asian Voice’s print deadline on Tuesday, provides Parliament and the nation with an update on the economy, public finances, and the government's progress toward its economic objectives. It is accompanied by the Economic and Fiscal Forecast from the Office for Budget Responsibility. A comprehensive update will follow next week.
