Chancellor Rachel Reeves has defended her economic strategy in the wake of criticism over her spring statement, insisting she will not shy away from the difficult decisions needed to tackle Britain’s financial woes.
Writing in The Times, Ms Reeves acknowledged that there are “no quick solutions” to repairing the economy but argued that her policies were already showing signs of progress. However, her decision to cut welfare spending and tighten Whitehall budgets has drawn sharp criticism from opposition parties, unions, and economists, who warn the measures could deepen financial hardship for vulnerable groups.
Concerns over welfare cuts
The Chancellor’s economic plan includes significant reductions to incapacity benefits, affecting nearly three million families. Additionally, around 800,000 claimants will see their Personal Independence Payments (Pip) reduced, while an estimated 250,000 more people—including 50,000 children—are expected to fall into relative poverty after housing costs by the end of the decade, according to government impact assessments.
Ms Reeves, however, remains firm in her position, stating that while the reforms are challenging, they are necessary to ensure long-term economic stability.
“While there are no quick solutions to fixing our damaged economy, our plan for change is starting to bear fruit: interest rates cut and wages up; waiting lists down and defence bolstered; the economy predicted to grow faster than the OBR had previously expected from 2026,” she wrote.
“I won’t shy away from the challenges we face, and change won’t happen overnight. But the prize on offer to us is immense—shovels in the ground and cranes in the sky, and an economy that finally delivers on the priorities of the British people.”
Economic growth forecast and uncertainty
The Office for Budget Responsibility (OBR) has adjusted its economic forecast following the Chancellor’s statement. While it has halved its GDP growth prediction for 2025 from 2% to just 1%, it has upgraded forecasts for subsequent years, with GDP expected to increase by 1.9% in 2026, followed by 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.
However, experts caution that the UK’s economic outlook remains uncertain. The OBR noted that a potential trade dispute with the United States, triggered by Donald Trump’s announcement of a 25% tariff on car imports, could significantly impact Britain’s financial position. If the UK fails to negotiate an exemption, this could erode the £9.9 billion fiscal buffer Ms Reeves has left to meet her self-imposed rule of balancing day-to-day spending with tax receipts rather than borrowing.
Criticism from economists and think tanks
The Chancellor’s approach has drawn scrutiny from leading economic institutions. The Institute for Fiscal Studies (IFS) and the Resolution Foundation are set to publish their full analysis of the statement, but early assessments suggest mixed reactions.
IFS director Paul Johnson warned that Ms Reeves’ decision to delay detailed tax policy announcements until the autumn budget could lead to “damaging speculation and uncertainty” over the next six months.
“The £9.9 billion buffer is small by historical standards, and leaving tax policy uncertain until the autumn risks further instability,” Mr Johnson said. “We might be in for another blockbuster autumn budget. That didn’t go well between last July’s election and October’s budget. I fear a longer rerun this year.”
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Meanwhile, the Resolution Foundation noted that while the cuts to departmental spending do not amount to a return to full-scale austerity, they are still significant and will not be “pain-free.” The think tank also highlighted concerns over stagnant living standards, warning that they are on course to be worse than those seen in the 2010s.
Future tax hikes?
Speaking at a press conference on Wednesday, Ms Reeves declined to rule out tax increases in the next budget but maintained that her primary focus remains on economic growth.
“We are prioritising growth, making sure our economy is on a stronger footing for the future,” she said. “Difficult decisions have to be made, but we are ensuring that we have a fair and responsible plan to secure prosperity in the years ahead.”
Despite the Chancellor’s reassurances, opposition parties continue to criticise the government’s economic policies. Shadow Chancellor Jonathan Reynolds accused Ms Reeves of “mismanaging the public finances” and implementing policies that disproportionately impact lower-income families.
“Instead of providing the investment and support needed to build a stronger economy, this government is pursuing policies that will make life harder for millions of people,” Mr Reynolds said.
As the political debate over Britain’s economic future intensifies, all eyes will now turn to the autumn budget, where Ms Reeves will be expected to provide further details on her long-term strategy. Whether her policies will yield the economic stability she promises remains to be seen.
