Spring Statement 2025: what you need to know

Background

The Chancellor has committed to the principle of holding one major fiscal event a year. Last year’s Autumn Budget was a major event, heralding a range of tax rises and big increases in public sector pay and NHS spending (although as we have made clear, this increase was not as generous as described.) 

Today’s statement was not intended as a policy announcement. Instead, it was designed to reiterate the government’s commitment to its self-imposed fiscal rules. The first is the stability rule, which ensures that day-to-day spending is matched by tax revenues, so the government is only borrowing to invest.  

The second is the investment rule, which requires the government to reduce net financial debt as a share of the economy. Both needed to be updated following the Office for Budget Responsibility’s latest forecasts, also published on 26 March, that show a weaker than expected economic outlook than at the Autumn Budget. 

Overview

What did the Chancellor announce?

The Chancellor restored her £9.9 billion headroom for the first rule by doing two things: 

• cutting £4.8 billion in welfare payments by 2028/29
• a decrease in planned 2025/26 departmental budgets, decreasing from 1.3 per cent in autumn 2024 to 1.2 per cent today, although health and care were protected from these cuts (see more below).

The health element of universal credit (which reflects a limited capability to work) was going to be halved for new claimants to £50 a week in 2026/27, then frozen.

Media talk of austerity is somewhat overblown. This is because the Spring Statement’s announcements are a reduction in relative generosity compared the Autumn Budget. Averaging a 1.2 per cent real-terms increase year on year, they remain far above what was planned in the former Chancellor Jeremy Hunt’s final budget in spring 2024.

While there were no health-specific announcements, the Chancellor announced a few relevant changes to the 2025/26 overall budget. Firstly, a civil service ‘transformation fund’ of £3.25 billion, £150 million of which will be used for redundancy payouts in line with the government’s planned civil service cuts, including for NHS England. 

And secondly, increasing overall public sector capital funding from what was planned in the autumn. It is not yet clear how much of this is new spending and how much is reallocated from other sources. In any case, we can expect most of this to fund new defence commitments.  

There were no new taxes announced. There were also no announcements for 2026/27 onwards. 

What does today’s news mean for the Department for Health and Social Care and NHS England?

There are two aspects to today’s news to consider. Firstly, the Chancellor’s policy announcements do not affect health funding or policy directly. They do not specifically mention how much it will cost to disestablish NHS England, although we know that £150 million of the ‘transformation fund’ will go towards quango redundancies. 

At the same time, the Chancellor has returned to her £9.9 billion headroom, which as events since autumn show – and in an overall budget of greater than £1 trillion – is very small indeed. This will leave the government with little room for manoeuvre – it is less than a third of the average for Chancellors since 2010 – should further economic turmoil wipe out that small headroom. There is a real risk of further cuts or very low real-terms increases in the next phase of the Spending Review in June. 

The second is the OBR’s analysis. This reveals several important things for members:

• Last autumn’s health spending increases are now more front-loaded. The 2024/25 health and social care revenue spend has increased from a forecast £190.1 billion in October 2024 to a forecast £193.3 billion today. This means health and social care funding will increase 4.7 per cent in real terms this year, higher than the 3.8 per cent forecast in October. While it is not entirely clear in the OBR’s analysis, it is likely due to health and social care taking a slice of HM Treasury’s reserves to pay for the Elective Recovery Fund, and changes in the inflation forecast. 
• The flipside is that the real-terms increase for 2025/26 has decreased from 3 per cent (£200.5 billion) to today’s 1.8 per cent (£202 billion), albeit from a higher base. 
• Healthcare funding has overall increased nonetheless: the overall real average increase between 2023/24 and 2025/26 is marginally higher today than forecast in October, increasing by 0.1 to 3.5 per cent (see table 5.4 on page 102). 
• Health and care capital will be £200 million less than forecast in October. It is not exactly clear why, but the OBR states it has made assumptions about underspends from historical data. 

More generally, the declining economic environment adversely affects how much money the government will have to spend on public services in the coming years. 

Of particular concern is the OBR halving the expected 2025 growth rate to 1 per cent and its strong warning that further tariffs could significantly reduce its growth forecasts. Less growth means lower tax receipts, which in turn likely mean less additional money for the NHS in 2026/27 onwards. Inflation also remains a concern, especially given the likely impact of April’s Employer National Insurance increase. 

What is the NHS Confederation doing to influence the forthcoming second phase Spending Review?

The second phase will be announced in June and will cover the years 2025/26-2026/27 for revenue, and capital until 2029/30. We continue to call for the 4 per cent annual real-terms increase in overall funding needed to restore the NHS. For capital specifically, we are calling for at least £3.3 billion more of public funding each year for the NHS for the remainder of the Spending Review period. 

Over the past 18 months, we have undertaken a programme that has investigated how much capital the NHS might need at the upcoming Spending Reviews, how we might raise this money, and how the capital funding system can be reformed to be more efficient. 

Our next phase will build on what we have done before by harnessing the growing consensus that private investment will have a role to play in fixing the NHS and helping it become more productive. Today’s economic forecasts only further highlight the need to bring in private investment to the health service. 

The government’s next Spending Review and ten-year infrastructure plan provide key influencing opportunities.