Rachel Reeves to cut welfare further and unveil extra billions for defence in Spring Statement
25 March 2025, 23:01 | Updated: 26 March 2025, 07:39
An extra £2.2 billion will be spent on the UK's defence over the next year to ‘secure Britain’s future’, the Chancellor is to announce at the spring statement - as she moves to cut more from the welfare budget.
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Rachel Reeves will promise to ‘secure Britain’s future’ by boosting defence spending in the spring statement on Wednesday, in a marked move towards the UK spending 2.5% of GDP on defence.
The government announced it will aim to reach the 2.5% target by 2027, and has promised to cut foreign aid spending to reach the target.
The spring statement comes amid increased speculation that the chancellor will unveil further spending cuts as she seeks to balance the books after disappointing growth figures and higher-than-expected borrowing.
The chancellor will confirm the divisive £5bn in welfare cuts which were announced last week ,as the Office for Budget Responsibility (OBR) is set to forecast that growth for 2025 has halved from 2% to 1%.
Reeves will say the UK must "move quickly in a changing world" to up its defence commitment, when she makes the statement in the Commons on Wednesday.
Read more: Reeves 'to slash 50,000 civil service jobs' as she pushes to cut spending by £2 billion per year
Reeves will insist this plan, set out by the Prime Minister in February, was the "right decision in a more insecure world", adding: "But we have to move quickly in a changing world. And that starts with investment."
Reeves - Government determined to turn around economy amid fall in GDP
"This increase in investment is not just about increasing our national security but increasing our economic security, too. As defence spending rises, I want the whole country to feel the benefits," the Chancellor is expected to tell MPs.
The April funding increase will help pay for new military technologies, as warships are set to be upgraded with long range laser and microwave weapons - collectively known as directed energy weapons.
Homes for military families will also be refurbished, which includes the 36,000 homes recently brought back into public ownership from the private rented sector.
Ministers hope to create jobs in manufacturing and technology across the UK as they ramp up defence spending, with the aim of reaching their goal of growing the economy.
The chancellor will be keen to show she is meeting her self-imposed fiscal rules in her response to reduced growth forecasts by the OBR and the Bank of England.
Reeves has sought to blame deteriorating public finances on a global rise in borrowing costs, as she is widely expected to announce spending cuts.
Speaking to broadcasters ahead of the statement, the Chancellor said Britain had not been "immune" from global increases in the cost of government debt.
The UK economy shrank unexpectedly by 0.1% in January
But she insisted she would meet her "non-negotiable" fiscal rules despite expectations that official forecasts also published on Wednesday would show her ‘headroom’ against those targets had vanished.
She said: "We can see that the world is changing, and part of that change is increases globally in the cost of government borrowing - and Britain has not been immune from those challenges.
"The OBR will set out their verdicts on growth and on the public finances today, but we will continue to meet the fiscal rules I set out in the budget last year.
"Economic stability is non-negotiable, I will never play fast and loose with the public finances like the previous government did."
The chancellor has already suggested she will not raise taxes to meet her fiscal rules, saying "We can't tax and spend our way to higher living standards and better public services.”
“That's not available in the world we live in today," the chancellor told the BBC.
It comes after worse-than-expected public borrowing figures yesterday piled pressure on the Chancellor again in the run-up to the fiscal event.
The UK government borrowing rose by more than expected last month to £10.7billion – around £4billion more than was predicted – wiping out any headroom she may have had.
The Institute for Fiscal Studies warned the Chancellor was “boxed in” by her fiscal rules, and promised not to raise taxes further, or return to austerity for public finances.
