On Wednesday, Chancellor Rachel Reeves will stand up in Parliament to give her most important speech since October’s budget.
In the spring statement, she will set out the current economic reality in the UK and set out any measures she’s planning to take to get the country’s finances on the right track.
Despite Kemi Badenoch’s efforts to paint it as an ’emergency budget’, Wednesday’s announcement doesn’t carry the same weight and won’t be as comprehensive as October’s. The Chancellor has promised no policy changes.
But we should be prepared for a sobering assessment of the UK’s big fiscal picture – and probably some unpleasant news for certain government budgets.
The reason the Tories are keen to describe it as an emergency budget is because the economy is in a pretty unhealthy state at the moment. That’s one thing everyone seems to agree on.
Growth is not happening as quickly as the government would like, while borrowing costs are up. The opposition says this is down to Reeves’ last budget, while the Treasury blames global factors.
Elements of both are likely to be right. There’s no disguising the fact that it’s a turbulent time for the world economy, thanks in no small part to a certain ally across the Atlantic who thinks the most beautiful word is ‘tariff’.
But at the same time, Reeves gave herself a relatively small amount of headroom last year to allow for the twists and turns of the global market and, for good measure, she also set herself rules for the future which she swore not to break.
Research body the Institute for Fiscal Studies said the Chancellor ‘chose a set of pass–fail fiscal rules, repeatedly declared these to be “non-negotiable”, and then set out to meet them by the smallest of margins’.
It’s now thought her headroom has been wiped out since October. And with tax rises ruled out, and Reeves determined to avoid borrowing as far as possible, that leaves one main avenue to getting things back on track: cuts.
So, here we are. The two big government announcements you might remember from this month – the abolition of NHS England and £5 billion in welfare cuts – were both paving the way for Wednesday.
Pretty much every government department is being asked to find ways to save as much money as possible. We may learn just how big that ask will be at the spring statement, but make no mistake – it’ll be big.
Take the Civil Service for instance. Yesterday, Reeves told the BBC’s Laura Kuenssberg she wanted to cut government running costs by 15% before the end of the decade.
Asked on Sky News how many civil servants could lose their jobs as a result, she said about 10,000.
There’s another spanner to throw into the works too.
You may remember another big government announcement from last month, in which Keir Starmer committed to raise defence spending to 2.5% of GDP from 2027 then 3% .
That boost would be fully funded with an enormous cut to the aid budget, he said. So it may not directly mean cuts elsewhere, but since there can be no reduction in the defence budget, that means more money will have to be found in other departments.
Add to that the ambitious projects in areas like housing and infrastructure already announced by the government, and you’ve got a recipe for significant pain in public services.
Metro will make sure you know all the details on Wednesday.
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