The SNP and Tories have attacked the chancellor for choosing not to axe the energy windfall tax in her spring statement.

The two parties have been calling for Rachel Reeves to end the Energy Profits Levy — something Labour expanded when it won the last general election.

Industry bodies have warned that the tax is costing the North Sea oil and gas sector jobs, while harming the economy and tax receipts.

The Conservatives warned Labour it had missed an opportunity to “reset the dial” in the North Sea.
The Scottish government urged the UK government to change its position.

Scottish finance secretary Shona Robison said: “It is very disappointing that the Chancellor does not appear to have heeded repeated warnings from across the energy industry on the urgent need to remove the tax grab on Scotland’s energy.

Jeremy Corbyn has described the spring statement as a “non-event” and “very sad” for a Labour government.

The former Labour leader said: “By June, when the next round of gas price increases come in for consumers, the government will have to come in with its support system to prevent them from getting too high.

“The £21 billion headroom that Rachel Reeves claims she has will be gone.”

The leader of Your Party also called for rent controls, an increase in the living wage, and the introduction of a new top rate of taxation.

He also warned the government that graduates had little hope of paying back their student loans. He added: “At some point some the government is going to have to face the reality that some of those debts are never going to be paid.”

Government spending on education, policing and transport will face real-terms budget cuts of over four per cent at the end of the decade, the Office of Budget Responsibility has warned.

The watchdog said that annual expenditure on departments that were not “protected” would fall by 4.4 per cent under current government plans.

It said the overall spending would have to be £13.5 billion higher in 2030-31 for unprotected departments to avoid budget cuts.

Ministers are facing growing pressures on budgets as a result of the need to spend more on the NHS and Sir Keir Starmer’s pledge to raise defence spending to 3.5 per cent of GDP by 2030.

Rachel Reeves will not decide how much money individual government departments will get until the next spending review due in 2027.

Rachel Reeves has faced claims that her statement on Tuesday was “tone deaf” on energy prices, and was warned that a commitment to cut energy bills by £150 would “ring hollow”.

The chancellor defended her fiscal policy, saying the government was in a “better place” to deal with gas and oil price shocks now than it was after the last general election.

But SNP MP Dave Doogan called her pitch a “40-minute self-aggrandising monologue saying how wonderful everything is in the economy”, adding that the chancellor lacked a strategy to deal with fuel bill prices.

And Conservative former chancellor Sir Jeremy Hunt told the Commons: “Her budget promise to reduce household energy bills by £150 is going to ring hollow for many people.”

The government has failed to provide any evidence that it’s overhaul of special needs funding for pupils will actually save money, the Office for Budget Responsibility has said.

It said that there is in fact a risk that spending would increase in the short term if there was a rise in the number of parents applying for special needs funding in the run-up to the changes.

The forecaster compared the reforms with previous attempts to overhaul the wefare system, which did not acheive any savings.

“The government has not set out specifically how the reforms will deliver this [reducing the number of pupils on special needs plans] or provided any estimates of any related cost savings,” it said.

The Gulf in chaos is currently “the biggest asterisk” attached to Rachel Reeves’ economic policy, says Times columnist Fraser Nelson.

Speaking on Times Radio, he said the Chancellor was “doing the best she can” but a global crisis could see “oil prices surging and the potential of an inflationary shock.”

He also warned that government growth figures needed to look healthier to align with Labour’s promises to voters.

“Ultimately this was a government elected on one word, ‘growth’. That was the manifesto. Not just growth, but the highest sustained growth in the G7, higher than America’s. Now we’ve seen America spinning ahead of the UK in growth terms.

“We’re seeing unemployment, as well, rise significantly. The good news, of course, is that inflation is coming down faster than was expected. That’s partly to do with the measures she took. but of course, inflation only started rising once she got in office in the first place.”

The OBR has said its predictions that inflation will fall to target levels early this year have become “more uncertain” after jumps in oil and gas prices linked to recent attacks in the Middle East.

David Miles, from the OBR’s budget responsibility committee, said: “I think what will happen to inflation is particularly uncertain in the past few days.

“As I mentioned earlier and we all know, there have been very large increases in gas prices and oil prices.

“Our central expectation had been that inflation would fall back towards the Bank of England’s 2 per cent target early this year and will be around that level at the end of the year.

“There must be more uncertainty around that right now.”

Britain will see a significant fall in the level of net migration almost entirely driven by more British people leaving the UK, the Office for Budget Responsibility has said.

The forecaster said that net migration levels would be 60,000 a year lower than previously forecast.

“This is driven entirely by a more negative assumption for net migration by British nationals,” it said.

It said that by 2030 the adult population would be 200,000 lower than previously forecast. The figures do not take into account the more recent collapse in net migration figures.

The government is forecast to miss its target to build 1.5 million new homes by the end of this Parliament by a significant margin, the official forecaster has said.

The Office for Budget Responsibility said 220,000 homes would be built in 2026–27, down from an average of 260,000 a year in the early 2020s.

It said that there was as yet no “meaningful” evidence that the government’s planning reforms were leading to more homes being built.

By the end of this Parliament it forecast that 1.3 million homes will have been built.

Britain’s welfare bill on pensioners and benefits will rise by a fifth to £407 billion by the end of this Parliament, the Office for Budget Responsibility has said.

The number of people claiming incapacity benefits will rise from 3.4 million to 4 million by 2030-31, while the number of people claiming disability benefits will rise from 6.5 million to 8.8 million.

Sir Keir Starmer was forced to abandon plans for welfare reform after a mass revolt by Labour MPs. The government has not announced plans for further welfare reforms

Unemployment is forecast to rise to the highest level since the pandemic, hitting 1.9 million by the end of the year.

The Office for Budget Responsibility said that the unemployment rate would rise to 5.3 per cent, the highest level since the coronavirus pandemic shut down the economy in 2020.

It means that there will be 400,000 more people out of work compared with when Labour first took office.

Britain’s tax burden is on course to hit a postwar high of 38 per cent, affecting living standards as Rachel Reeves’s tax rises act as a “drag” on people’s incomes.

The chancellor used her first budget to increase the employers’ rate of national insurance and her second budget to freeze income tax thresholds.

The combined measures will result in the government’s revenues from the two taxes rising from £480 billion in 2025-26 to £600 billion in 2030-31.

The Office for Budget Responsibility warned that the tax rate was so high it could constrain the economy by reducing people’s incentives to earn.

For months Rachel Reeves has been determined to make today’s spring statement a low-key affair, right down to changing its name from a “statement” to a “forecast”.

Until the weekend the plan had been to use the event — and the slightly improved economic data that came alongside it — to emphasise that her economic plan was working and to signal better times ahead.

But as Reeves stood at the dispatch box, she knew that events in the Middle East had already upended official forecasts and that any economic recovery was at the mercy of an international crisis over which she had no control.

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Total government spending on welfare is set to continue at record levels, according to the Office for Budget Responsibility.

Spending in 2025-26 is forecast to be £332.9 billion, slightly below the previous forecast of £333 billion.

It then rises every year to reach an all-time high of £406.9 billion in 2030-31, slightly above the previous forecast of £406.2 billion, driven by higher spending on pensioner and health-related benefits.

The level of government debt in 2025-26 is forecast by the Office for Budget Responsibility to be the equivalent of 94.3 per cent of GDP, lower than the previous forecast of 95 per cent.

Public sector net debt is then forecast to be 94.8 per cent of GDP in 2026-27, below the previous forecast of 95.3 per cent; 95.7 per cent in 2027-28; a peak of 96.3 per cent in 2028-29; then 96.1 per cent in 2029-30; and finally 95.1 per cent in 2030-31, a percentage point lower than the previous forecast for this year of 96.1 per cent.

The government is forecast to borrow £132.7 billion in 2025-26, below the Office for Budget Responsibility’s previous forecast of £138.3 billion. Borrowing is then forecast to be £115.5 billion in 2026-27, above the previous forecast of £112.1 billion.

It falls to £96.5 billion in 2027-28 (compared with the previous forecast of £98.5 billion), £86.0 billion in 2028-29 (compared with £86.9 billion), £63.4 billion in 2029-30 (compared with £67.9 billion) and £59 billion in 2030-31 (compared with £67.2 billion).

The amount of borrowing in 2025-26 is forecast to be equivalent to 4.3 per cent of GDP, or the total value of the economy, below the previous forecast of 4.5 per cent.

It then falls to 3.6 per cent in 2026-27, compared with the previous forecast of 3.5 per cent; 2.9 per cent in 2027-28 (compared with 3 per cent); 2.5 per cent in 2028-29 (compared with 2.6 per cent); 1.8 per cent in 2029-30 (compared with 1.9 per cent); and 1.6 per cent in 2030-31 (compared with 1.9 per cent).

Inflation in the UK as measured by the Consumer Prices Index is forecast to be 2.3 per cent in 2026, lower than the Office for Budget Responsibility’s previous forecast of 2.5 per cent.

It is then expected to be in 2 per cent in 2027, the same as previously forecast, and remain at 2.0 per cent in 2028, 2029 and 2030, unchanged from previous forecasts.

Rachel Reeves hit back at the shadow chancellor’s response to the spring forecast.

She said: “Whether it is in office or in opposition, the right honourable gentleman’s party, and his leader, have been wrong about the economy time and time again.

“They opposed economic responsibility and backed Liz Truss. Wrong. They opposed closer ties to Europe and backed Brexit. Wrong. They opposed cuts in child poverty and want to repeat austerity. Wrong values, wrong economics, they are just plain wrong.”

Sir Mel Stride, the shadow chancellor, called the spring forecast a “surrender statement”, and accused the government of giving up on the British people.

He said: “Is that it? What utter complacency, a chancellor in denial. She speaks of stability, what planet is she on?

“She has lurched from putting up taxes to destroying growth, to destroying headroom, to coming back to putting up more taxes, more growth destroyed. Round and round we go, like a fiscal twister ripping up everything in its path.

“As our economy bleeds out, what does she do? She comes to this house with nothing to say and with no plan, unless of course doing nothing is a cunning plan to avoid those U-turns further down the line.”

He added: “She is weak. She has even stripped the OBR [Office for Budget Responsibility] of its ability to assess whether she is meeting her fiscal targets. So, let it be remembered that at this time in this chamber, this weak and chaotic government gave up on the British people. She has nothing to say to us today. This is not a spring statement, it is a surrender statement.”

During her statement Rachel Reeves, said that she was confident that the government would beat the economic forecasts, highlighting trade deals and investment in infrastructure.

“It is Labour and only Labour that has the right plan for our country,” she said. “An economy cannot be working if it is delivering for only a few people in a few places.

“I believe that the working people who keep our country moving deserve a fair day’s pay for an honest day’s work.”

Rachel Reeves concludes her speech by repeating that the choices she has made as chancellor “are the right ones” for the economy.

“Stability in our public finances; interest rates and inflation falling; living standards rising; more children lifted out of poverty; more appointments in our NHS; more investment in our infrastructure; a growing economy; and more money in the pockets of working people. These are the right choices, this is the right plan,” she told the Commons.

Rachel Reeves has said she will announce “deepening alliances with our European partners” to boost the economy.

The chancellor will say at her Mais lecture in two weeks’ time that she will “go further in strengthening our global relationships, breaking down trade barriers and deepening alliances with our European partners for a more secured and connected economy”.

Reeves said she would be “backing innovation and harnessing the power of AI”.

The all-important fiscal headroom — how much leeway the government has to increase spending or cut taxes — has increased.

Even after factoring in additional funding commitments announced since the autumn budget, headroom against the stability rule in 2029-30 has increased from £21.7 billion to £23.6 billion.

Some of that boost has come from lower debt repayments as interest rates have come down. “Already we are expected to spend £3 billion a year less on debt interest by the end of the parliament than was forecast in the autumn” the chancellor said.

The UK economy will grow more slowly this year than previously expected, the Office for Budget Responsibility confirmed, although Rachel Reeves highlighted that it would grow slightly faster than expected in the following years.

Gross domestic product is forecast to grow by 1.1 per cent in 2026, according to the OBR, down from the prediction of 1.3 per cent it made in November.

The economy will then expand by 1.6 per cent in both 2027 and 2028, and by 1.5 per cent in both 2029 and 2030, which is slightly better than the OBR had forecast.

“By the next election, after accounting for inflation, people are forecast to be over £1,000 a year better off,” Reeves said.

Rachel Reeves has highlighted the positives from the economic outlook. “Inflation is down, borrowing is down, living standards are up and the economy is growing,” she said.

She said that the question voters ask at the next election will be whether they and their families are better off. “I am determined that will be the case,” she said.

The chancellor said that the Office for Budget Responsibility expected inflation to fall even faster than it forecast in the November budget.

She said: “I am in no doubt about Britain’s ability to navigate the challenges we face. The plan that I have been driving forward since the election is the right one — stability in our public finances, investment in our infrastructure and reform to Britain’s economy.”

“This government has restored economic stability,” Rachel Reeves has said, which was greeted with laughter from the opposition benches.

“Stability is the single most important precondition for economic growth. That is why we have committed to a single major fiscal event each year, limiting major policy changes to the budget and giving businesses and households the certainty they need.

“Today, the new forecasts from the Office for Budget Responsibility confirm that our plan is the right one: inflation is down, borrowing is down, living standards are up and the economy is growing.”

Rachel Reeves has pledged to “protect families from factors beyond our borders” as she delivered her spring statement.

The chancellor said the conflict in the Middle East made it “even more important” for the UK to have a clear economic plan to bring stability.

She said she was in regular contact with the governor of the Bank of England as well as with sectors most affected by the US action including the shipping industry.

She said she would be meeting industry leaders on Wednesday and pledged to “work with them to manage this uncertain period”.

Rachel Reeves has now arrived in the Commons and will shortly begin her spring forecast.

The surge in oil and gas prices as a result of conflict in the Middle East will have “some impact” on the cost of living at home, a cabinet minister has said.

Darren Jones, the chief secretary to the prime minister said “international events can obviously affect the UK economy”.

“There’s probably going to be some impact,” he told Sky News. “There’s no question about that. We don’t know what that is.

“But I think in the spring forecast later, what the chancellor will be able to show is that our plan is working in terms of a stable approach to the UK economy that, in a world where there’s lots of things happening, is a very attractive economy for investors and businesses.”

The global share sell-off has deepened, the dollar has strengthened and gas prices have surged as investors reconsidered the economic impact of the escalating conflict in the Middle East.

The FTSE 100 fell for a second day, dropping 2 per cent to 10,563.20 on Tuesday after sharp falls in Asia, where Japan’s Nikkei fell 3 per cent and South Korea’s Kospi lost 7.2 per cent. Markets on the Continent were also lower.

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Today’s spring statement will consist of two elements. The first will be an economic update from Rachel Reeves and the second will be updated forecasts from the government’s budget watchdog, the Office for Budget Responsibility.

Of these the second will be more consequential. The OBR will make a judgment on the state of the economy and set the parameters for the autumn budget.

Although it will not formally judge whether the chancellor is on track to meet her fiscal rules it will be possible to calculate this from the data it publishes.

It may announce plans to review how it accounts for the economic impact of migration, a decision which could have significant consequences for the autumn.

The latest data shows net migration significantly below the OBR’s forecast for 2025. Previous OBR estimates suggested that a permanent drop in net migration of 100,000 per year could increase its borrowing forecast by about £10 billion a year in the medium term.

If the OBR does decide to downgrade its forecasts for migration then this could force Reeves to increase taxes to fill the gap.

However, it could review how it judges the impact of migration more broadly — as critics say that at present it looks only at the benefits and not the associated costs of people arriving in the UK.

Rachel Reeves will claim that she has the “right economic plan” for an “increasingly uncertain world” as she responds to the latest economic forecasts from the government’s budget watchdog.

The chancellor will insist Labour has brought “stability” to the country’s finances, presiding over falling inflation and interest rates.

However, she will also accept that the UK could face more economic headwinds as a consequence of the conflict in the Middle East.

• Read the full article here

For months Rachel Reeves has been determined to make this spring statement a low-key affair — right down to changing its name from a “statement” to a “forecast”.

Ever since last year’s disastrous decision to announce further welfare cuts to offset a downgrade in growth forecasts Reeves has insisted that this year there will be no major policy announcements.

But even so, it will be a significant political event. Ministers hope to point to better forecasts from the government’s budget watchdog as evidence that the economy is turning the corner.

Yet these were calculated before the US attacks on Iran which have overnight pushed up the cost of UK borrowing, stoked fears of inflation and reduced the chances of interest rate cuts later this month.

If the conflict ends quickly these adverse impacts may be transitory but if it is drawn out then the economic headwinds will be real and there will be little the chancellor can do to shield households from their impact.

In this regard, Reeves’s decision to keep economic policy in a holding pattern until the autumn budget looks fortunate.

However it also underlines that, whatever she says about laying the foundations for economic stability and growth, the chancellor is not the master of her own destiny.