Rachel Reeves insisted her plans for the UK economy are “working” despite having to make billions of pounds of public spending cuts to plug a massive hole in the nation’s finances.
The Office for Budget Responsibility said economic growth will be just 1% this year – half what they forecast six months ago at the Budget.
Delivering her Spring Statement, the chancellor also confirmed that reforms to the welfare system will not save as much money as the government had hoped – forcing her to make a further £500m of cuts.
However, Reeves was able to announce that the OBR has upgraded its forecasts for economic growth for the next five years, hitting 1.8% in 2029.
And although inflation is now expected to average 3.2% this year – up from the 2.6% the OBR said last autumn – it will fall to 2.1% in 2026.
The OBR also said that households will be on average more than £500 better off than they are now by the time of the next election.
Reeves said: “The OBR confirm that our plan to get Britain building will drive growth in the economy and put more money in people’s pockets.
“There are no quick fixes, but we have taken the right choices now. Returning stability to our economy after years of mismanagement by the party opposite. Delivering security for our country and security for working people.
“That is what drives this government. That is what drives me as chancellor. And that is what drives the choices that I have set out today.”
Confirming that defence spending will increase by £2.2 billion next year, Reeves told MPs that “the world is changing” and that is was the government’s duty to respond.
She said: “A changing world demands a government that is on the side of working people – acting in their interest, acting in the national interest.
“Not retreating from challenges, not stepping back, but a government with the courage to step up to secure Britain’s future and to seize the opportunities that are there before us.
“I am impatient for change, just like the British people are, after 14 wasted years.
“And we are beginning to see change happen. Our plan for change is working. Defence spending is rising, waiting lists are falling, wages are up, interest rates are cut. That is the difference that this Labour government is making.”
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