Tag: growth

‘CATASTROPHIC’: Spring Statement welfare cuts will drive 250,000 more people into poverty

Chancellor ‘delivers security and national renewal in a new era of global change’

  • Chancellor vows to bring about “new era of security and national renewal” as she delivered a Spring Statement to kickstart economic growth, protect working people and keep Britain safe.
  • People to be on average £500 a year better off by the end of this parliament compared to under the previous government, putting more money in people’s pockets.
  • OBR forecast concludes government’s landmark planning reforms will result in a £6.8 billion boost to the economy and housebuilding at its highest level in over 40 years by 2029-30
  • Growth at the heart of Plan for Change as £13 billion of additional capital spend allocated alongside £2.2 billion defence funding boost next year.

THE Labour government said people will be on average £500 better off from 2029, relative to OBR’s autumn forecast, helping to deliver the Plan for Change as the Chancellor yesterday (Wednesday 26 March) announced a Spring Statement to grasp the opportunities in a changing world.

THEY WON’T. From November 2026, 370,000 people who already get PIP will lose it and another 430, 000 who would qualify now no longer will. These people will lose £4500 a year each. And 150,000 carers who look after them will no longer receive their £83.30 a week Carer’s Allowance.

The OBR has also concluded that the government’s landmark planning reforms will result in UK housebuilding reaching its highest level in over 40 years, bringing the UK one step closer to its Plan for Change mission to build 1.5 million homes.

The government says economy will be 0.2% larger in 2029-30 because of the reforms – worth around £6.8 billion in today’s money – growing to 0.4% over the next ten years. This represents the biggest positive growth effect it has ever forecasted for a policy that comes at zero-cost to taxpayers. The reforms will secure over 170,000 new homes for hard working families and leave borrowing £3.4 billion lower in 2029-30.

The Chancellor also set out how the government is protecting national security and maximising the growth potential of the UK defence sector by confirming a £2.2 billion increase in the defence budget in 2025-26 while ensuring UK defence is on the cutting-edge of technology and innovation.

But growth is still not where it should be, so at this Spring Statement, this government has gone ‘further and faster’ to kickstart growth by training up to 60,000 young people to get Britain building again; increasing capital investment by £13 billion over this parliament; and fixing public services by tearing out waste from its roots.

Growth

Kickstarting economic growth is the number one mission of this government, putting more money in people’s pockets. The government has already made considerable progress; supporting a third runway at Heathrow; revitalising the Oxford Cambridge Growth Corridor, launching the National Wealth Fund and making the right choices on public investment to drive growth across the UK.

The actions of this government across the Autumn Budget and Spring Statement, if sustained, lead to a 0.6% rise in the level of real GDP by 2034-35, signalling the government’s growth plan is working.

The OBR concluded that the stability rule is met by £9.9 billion and the investment rule is met by £15.1 billion. Both rules are met two years early, meaning from 2027-28 the government is only borrowing for investment and net financial debt is falling.

The government is not satisfied with short-term growth figures, and is going further and faster today to improve this:

  • To go further and faster to get Britain building, the Chancellor has today announced a further £13 billion of capital investment over the Parliament to go further on growth, on top of the £100 billion uplift announced at Autumn Budget. This will deliver the projects needed to catalyse private investment, boost growth and drive forward the UK’s modern industrial strategy – unlocking the potential of the Oxford Cambridge Growth Corridor which could add up to £78 billion to the UK economy by 2035.
  • Taken together, this greater capital investment more than offsets the modest savings on day to day spending and means the total departmental spending will increase over the next five years, when compared with plans in the Autumn.
  • Over this Parliament, the government is funding a £625 million package to boost skills in the construction sector, which is expected to provide up to 60,000 more skilled construction workers to support the government’s plans to deliver 1.5 million homes in England over the parliament and progress vital infrastructure projects.
  • As part of this, the government is providing further support to scale up existing construction skills pathway over this Parliament through £100 million for 35,000 additional training places in construction-focused Skills Bootcamps, supporting trainees, ‘returners’, and existing employees to succeed in the sector. Building on the £40 million investment in the new Growth and Skills Levy at Autumn Budget 2024, the government is also providing a further £40 million to support up to 10,000 more young people to access new construction Foundation Apprenticeships, which will provide a key entry route into a thriving industry.
  • The government is ensuring there are enough skilled construction workers in the system, with £100 million to deliver 10 Technical Excellence Colleges specialised in construction across every region in England, and £165 million to increase funding for training providers delivering construction courses for 16-19-year-olds and adults.
  • The government is committed to supporting employers to unlock further investment in training to deliver more skilled construction workers, and is providing £100 million, alongside a £32 million contribution from the Construction Industry Training Board to deliver up to 40,000 industry placements in construction each year.
  • Supported by the construction skills package, the government confirmed this week that there will be a £2 billion injection of new grant funding to deliver up to 18,000 new social and affordable homes. The new funding will only support developments on sites that will deliver in this Parliament, getting spades in the ground quickly to build homes in places such as Manchester and Liverpool.

Defence

The world is changing before our eyes, reshaped by global instability, including Russian aggression in Ukraine. Europe is facing a once-in-a-generation moment for its collective security, with conflicts overseas undermining security and prosperity at home.

A month ago, the PM announced the biggest sustained increase in defence spending since the Cold War as a result of the changing global picture, now reaching 2.5% of GDP by April 2027, and with an ambition to reach 3% in the next Parliament subject to economic and fiscal conditions.

We are going further and faster to protect our national security and maximise the economic growth potential of the UK defence sector:

  • Increasing the defence budget by £2.2 billion in 2025-26, taking additional spending on defence to over £5 billion since the Autumn Budget.
  • This raises spending on defence to 2.36% next year and will be invested in fitting Royal Navy ships with Directed Energy Weapons five years earlier than planned, providing better homes for military families and modernising His Majesty’s Naval Base Portsmouth.
  • Setting a minimum 10 percent ringfence for equipment spending on emerging technologies like drones and autonomous systems, dual-use technology, and AI-powered capabilities, so that British troops have the tools they need to fight and win in modern warfare.
  • Getting this new tech into the hands of our armed forces quicker by cutting away bureaucracy, with a new UK Defence Innovation unit within the Ministry of Defence spearheading efforts to identify promising technology and ensure these get to the frontline at speed, while also bolstering the UK tech sector and crowding in private investment.
  • Creating bespoke procurement processes for different types of military equipment, learning lessons from our rapid support for Ukraine to drive faster timescale targets for operationalising new tanks, aircraft and other essential tools for modern warfare.
  • This government is determined to transform the defence sector into an engine for growth by focusing this investment on where it boosts the productive capacity of the economy such as investment in innovation and novel technologies. As a result of the increase in defence spending to 2.5%, the government estimates this could lead to around 0.3% higher GDP in the long run, equivalent to around £11 billion of GDP in today’s money.
  • The government’s investment in defence will also support its number one mission to deliver economic growth. UK citizens will be protected from threats at home whilst creating a stable environment in which businesses can thrive, and supporting highly skilled jobs and apprenticeships across the whole of the UK.

Reform

The government is determined to make the public sector more productive and to improve services for working people. But the changing world means we need to go further and faster to ensure we can deliver the public services that working people care most about.

The government has shown its commitment to taking the difficult decisions required to drive efficiencies and reform the state – including announcing that the world’s largest quango, NHS England, will be brought back into the Department for Health and Social Care, reducing bureaucratic inefficiencies and duplication; and driving out wasteful government spend through cancelling thousands of government credit cards.

Getting more people into jobs is also central to the government’s growth mission. This broken welfare system that is letting people down by asking them to prove what they can’t do, rather than focusing on what they could do with the right support – trapping people due to fear of trying work, lack of support and poor financial incentives.

The social security system will always protect those who can never work, that is why this government is proposing an additional premium that will safeguard their incomes. And will end reassessments for people with the most severe, life-long conditions to give them dignity and security.

Helping more people into work is a central aim of these reforms and which is why the government is tackling incentives to be inactive by abolishing the WCA, rebalancing Universal Credit, and investing more into employment support.

We will always support those with long term health conditions through the Personal Independence Payment, which will remain an important non-means tested benefit for disabled people and people with long term health conditions. But these reforms will make the system more targeted and sustainable to ensure the safety net is there for those who need it most.

The OBR have now set out their final assessment of costings and confirmed this welfare package will reduce welfare spending by £4.8 billion in 2029-/30.

The government will modernise the Civil Service into a more productive and agile organisation that can effectively deliver the Plan for Change, underpinned by a digital revolution, while cancelling thousands of government procurement cards.

Today, the Chancellor has gone further:

  • The Chancellor has confirmed the creation of a £3.25 billion Transformation Fund to support the fundamental reform of public services, seize the opportunities of digital technology and Artificial Intelligence (AI), and transform frontline delivery to release savings for taxpayers over the long-term.
  • The Fund will invest in vital public services and accelerate the modernisation of the state by taking the next step to reform the children’s social care system through an additional £25 million for the fostering system. This will include funding the recruitment of a further 400 new fostering households, providing children with stability and addressing cost pressures on local government.
  • The fund will also support the managing offenders in the community, by providing £8 million for new technology so probation officers can focus on reducing reoffending, rather than filling out forms.
  • In addition, it will provide £42 million for three pioneering DSIT-led Frontier AI Exemplars. These Exemplars will test and deploy AI applications to make government operations more efficient and effective and improve outcomes for citizens by reducing unnecessary bureaucracy.
  • To create an agile and productive state we are also providing £150 million for government employee exit schemes. This will support a leaner and more efficient Civil Service, helping to reduce administration costs by 15% by the end of the decade.
    The Chancellor also announced a package of measures to close the tax gap, raising £1 billion per year by 2029-30. The UK tax gap was estimated to be around £40 billion in 2022-23.
  • The Spring Statement earmarks around £80 million in new money for third party debt collectors to bring in £1.3 billion over the next five years – a return of around £16 for every pound spent for UK public services and investment projects. HMRC will also receive £4 million in new funding to pilot a new test and learn programme with the private sector to improve the tax collection agency’s approach to recouping older unpaid tax debt. Ministers will decide whether to proceed with a larger exercise later this year based on the results of this test.
  • An additional 600 staff will also be recruited into HMRC’s debt management teams. This means that for every £1 spent on these staff, over £13 of debt is expected to be recovered. The staff will work with the private sector to make collecting tax debt more efficient including through automating admin processes.
  • The Spring Statement also announces £100 million in new funding for HMRC to recruit a further 500 compliance officers from April 2025. This will raise £241 million in unpaid tax over the next five years.
  • Late payment penalties for VAT and Making Tax Digital for income tax Self Assessment will increase to incentivise taxpayers to pay on time. This will be from 2% to 3% at 15 days, 2% to 3% at 30 days, and 4% to 10% from day 31. This will take effect from April 2025.
  • As announced in the autumn, Making Tax Digital for income tax Self Assessment will be extended to sole traders and landlords with income over £20,000. The Spring Statement confirms that this additional group will join Making Tax Digital from April 2028. This will build on the existing plan which will see sole traders and landlords with income above £50,000 joining from April 2026, and those with income above £30,000 joining from April 2027. Around 4 million businesses have an income below the £20,000 threshold.

Looking Forward

This Spring Statement builds on the Autumn Budget and the decisions taken since required to deliver stability to the British economy and kickstart economic growth.

The government will set out its plans for spending and key public sector reforms at the Spending Review which will conclude on 11 June 2025.

This will not be a business-as-usual Spending Review. The government has fundamentally reformed the process to make it zero-based, collaborative, and data-led, in order to ensure a laser-like focus on the biggest opportunities to rewire the state and deliver the Plan for Change.

At the Spending Review, the Budget in the autumn and across the Parliament, the government will continue to prioritise growing the economy to deliver change.

RESPONSES:

UK spending cuts ‘risk harm to most vulnerable’

Finance Secretary responds to Spring Statement

Spending cuts announced by the Chancellor risk harming some of the most vulnerable people in society, Finance Secretary Shona Robison has said.

Responding to the Spring Statement, Ms Robison said: “Today’s statement from the Chancellor will see austerity cuts being imposed on some of the most vulnerable people in our society. The UK Government appears to be trying to balance its books on the backs of disabled people.

“Not content with these cuts, the UK Government is still expected to short-change Scotland’s public services on additional employer National Insurance costs to the tune of hundreds of millions of pounds. This will be felt in public services that people rely on up and down the country – services such as our NHS, GPs, dentists, social care providers, and universities.

“The UK Government’s choice to increase defence investment is welcome, but its choices to shortchange public services and deliver austerity cuts to some of the most vulnerable are deplorable.”

TRUSSELL:

Trussell responds to ‘catastrophic’ Spring Statement

Cara Hilton, Senior Policy Manager at Trussell in Scotland, said: “Today’s announcement has incredibly worrying implications for disabled people in Scotland.

“The insistence by the Treasury on driving through record cuts to disabled people’s social security to balance the books is both shocking and appalling. People at food banks are telling us they are terrified how they’ll survive.

“These brutal cuts to already precarious incomes won’t help more disabled people find work, but they will risk forcing more people to skip meals and turn to food banks to get by.

“Cuts come at a cost. Driving up hunger and hardship means more spending on already struggling public services, with increased hospital and GP visits a very likely outcome of these actions.

“Disabled people are already three times more likely to face hunger, and over three quarters of people in receipt of Universal Credit and disability benefits are already struggling to afford the essentials like food. This will only get worse.

“These cruel cuts are out of touch with what voters want from this government. The government says people voted for change in Westminster, but we know that seven in ten voters across political parties agree the social security for disabled people should at least be enough to cover essential living costs. This is a change for the worse, and it is disabled people who will pay the price.”

David, 46, has a bone disease and is terrified by the prospect of cuts to his disability benefits. He has recently been forced to turn to a Trussell food bank for support.

He said: “I am terrified now that the Chancellor has confirmed that my disability benefits will be cut. The bone tumours in my hips cause me pain everyday and force me to use crutches, and in the cold weather my symptoms worsen but I already can’t afford to put the heating on.

” I don’t know how I’ll survive. It’s not my fault I’m disabled, and I shouldn’t be punished for it.

“Life costs more if you’re disabled. Things like specialist equipment and travel to healthcare appointments all add up. PIP – which the government is brutally cutting – is there to account for these extra costs. It is not a luxury, and I shouldn’t need to use a food bank or turn to charities like Trussell for support.

“Cutting my benefits won’t get me back to work – it will just push me deeper into poverty.”

JOSEPH ROWNTREE FOUNDATION

“The Chancellor said today that she would not do anything to put household finances in danger Yet the government’s own assessment shows their cuts to health related benefits risk pushing 250,000 people into poverty, including 50,000 children.

“Their assessment also found:

  • 800,000 will lose PIP according to the OBR
  • 3m will lose money from changes to the main health element of UC, £500 a year for existing claimants, and £3000 for new claimants
  • £500m will come out of the carers benefits bill as 150,000 lose carers allowance or UC care element.

“The Chancellor said the world has changed, and today’s announcements places the burden of that changing world on the shoulders of those least able to bear the load. These cuts will harm people, deepening the hardship they already face.”

CHILD POVERTY ACTION GROUP:

Responding to today’s Spring Statement, chief executive of Child Poverty Action Group Alison Garnham said: “Stealth social security cuts bring neither stability nor security to struggling families and will push child poverty even higher.

“Growth and better living standards are not achieved by taking money from families with the least.

“Government must invest in social security support – not cut it – for the most vulnerable, or risk being remembered as the Labour administration under whose watch child poverty continued to rise.”

CARERS UK:

STUC:

INDEPENDENT ALLIANCE MPs:

KIM JOHNSON MP:

OCTOPUS ENERGY:

Greg Jackson, CEO of Octopus Energy, said:  “It’s good to see the focus on planning and other reforms that can unlock investment to help make Britain more productive and drive growth.

“We were also pleased to see the receipts from the Government’s sale of Bulb to Octopus funding 36,000 homes for armed forces families. It’s a sign of how business and Government can work together for the good of the country.”

FRONT PAGES:

MOMENTUM:

NEW ECONOMICS FOUNDATION:

JEREMY CORBYN:

PRIME MINISTER KEIR STARMER:

THE NATIONAL:

TRADES UNION CONGRESS (TUC):

Responding to today’s (Wednesday) Spring Statement, TUC General Secretary Paul Nowak said: “Labour inherited a toxic economic legacy from the Conservatives. But at the Budget the Chancellor took the right call to invest in repairing our public services and infrastructure. 

“To rebuild Britain this approach must continue long-term. In the face of strong global headwinds, we need to keep building stronger foundations at home. That must include protecting the most vulnerable. 

“As the last 14 years have shown us – you cannot cut your way to growth. UK taxes are low as a share of GDP. Those with the broadest shoulders must continue to contribute more through a fairer tax system.

“And the Tories’ botched Brexit deal must be improved to boost growth and trade.”

On the government’s social security reforms, Paul said: “Ministers need to rethink their plans. Decisions that affect millions of people’s lives must be made with care – not as a last-minute response to changed fiscal forecasts. 

“These changes mean many disabled people – whether they are in work or not – will be pushed into hardship. 

“And removing support could even make it harder for some people to stay in their jobs.

“Disabled people need timely access to high quality healthcare, and accessible jobs – particularly in the towns and communities where there are fewest opportunities.”

On the public sector workforce, Paul added: “Public sector workers are key deliverers of national renewal. 

“But after 14 years of Tory chaos and ruin, many feel burnt out and demoralised.

“It’s vital the government invests in these workers and recognises the key role they play in improving the services we all rely on.

“Any approach to transforming our public services must include clear workforce plans for every part of our public sector, developed in partnership with staff and unions.”

On the OBR’s growth forecasts, Paul said: “It is time to review both the role of the OBR and how it models the long-term impacts of public investment. Short-term changes in forecasts should not be driving long-term government decision-making.”

UNITE THE UNION:

UK FINANCE:

David Postings, Chief Executive Officer, UK Finance said: “The chancellor’s Spring Statement focused on stability and growth in the UK. We welcome the government’s continued commitment to growing the economy and the financial services sector is committed to playing its part in support.

“Building on recent positive regulatory reform plans, we now look forward to the upcoming Industrial Strategy, which will be key to unlocking further investment and delivering growth through various sectors, including financial services.”

MENTAL HEALTH FOUNDATION:

LLOYDS BANKING GROUP:

Charlie Nunn, Chief Executive Officer, Lloyds Banking Group said: “A safe and lasting home is the foundation for good lives and livelihoods, and we welcome this boost to building much-needed social and affordable homes.

“As the UK’s biggest commercial supporter of social housing, we’re working across the private, public and community sectors to help increase provision of good quality, genuinely affordable housing for those in need.”

UNITE HOSPITALITY:

DAILY MIRROR:

POVERTY ALLIANCE:

Responding to the Spring Statement, Poverty Alliance chief executive Peter Kelly said: “People in the UK voted for change at the last election because they were desperate for a government that delivers a just and compassionate country. Today’s announcements undermine that ambition.

“It is completely unjust to, once again, balance the books on the backs of the those on the lowest incomes. Today’s statement layered additional cuts to our social security system on top of those announced last week. That will have a devastating impact for households across the country.

“The Government’s own analysis shows that these changes will push at least 250,000 people, including 50,000 children into poverty, undermining the forthcoming child poverty strategy before it’s even published.

“These cuts will push people into debt and destitution. They will continue the need for food banks. They will stop people heating their homes, or charging essential medical and support equipment.

“People know that there is no justification for these cuts. It does not have to be like this. The Chancellor could scrap her self-imposed fiscal rules or use our taxation system to raise the revenue needed for the better future we all want to see.

“The UK Government is re-running a failed experiment – austerity will not deliver economic growth. And it certainly won’t deliver a just and compassionate society.”

SCOTTISH HUMAN RIGHTS COMMISSION:

Deep concern about impact of UK Government’s Spring Statement

The Scottish Human Rights Commission (SHRC) is deeply concerned about the impact of announcements on the future of the UK welfare system in the UK Government’s Spring Statement, especially for disabled people and their families and communities. 

Plans to cut the health element of Universal Credit will have a direct effect on the human rights of those disabled people in Scotland who are unable to work. Although payments to support people with the additional costs of disability are devolved in Scotland, the UK Government’s proposals will have negative consequences for the Scottish Budget.

Severe economic hardship

Earlier this month, the UN Committee on Economic, Social and Cultural Rights, which holds governments around the world to account for their record on human rights, warned that changes to the UK welfare system introduced since 2012 have “eroded the rights to social security and to an adequate standard of living, disproportionally affecting persons with disabilities, low-income families and workers in precarious employment” and warned that these changes have resulted in “severe economic hardship”.

Last year, the UN Committee on the Rights of Persons with Disabilities reiterated its position that the UK welfare system is leading to ‘grave and systematic’ violations of disabled people’s rights. Over the past week many disabled people, Disabled People’s Organisations and civil society organisations have expressed shock and fear about what further changes to the system could mean for people.

Professor Angela O’Hagan, Chair of the SHRC, says: “With these announcements, the UK Government is not only disregarding the expert findings and recommendations of human rights bodies, but actively pursuing regressive changes that further deteriorate the rights of disabled people in Scotland. 

“Indeed, these steps may potentially represent a breach of the UK’s obligations under international human rights law, particularly its duty to progressively realise the rights to social security, an adequate standard of living, and non-discrimination.

“Social security, an adequate standard of living, and non-discrimination are not optional benefits — they are binding human rights that the UK is required to respect, protect, and fulfil for everyone.

“These proposals fly in the face of both the letter and the spirit of the UK’s human rights obligations.”

VOLUNTEER SCOTLAND:

We share the concerns voiced by many third sector organisations regarding the Chancellor’s Spring Statement on Wednesday (writes Volunteer Sotland’s SARAH LATTO).

The significant cuts to health-related benefits have the potential to push more people into financial difficulty. This would create significant additional demand for third sector services and the volunteers that support them.

This comes at a time when the third sector is facing unprecedented pressures, and volunteer participation is in significant decline. Given the reported challenges many organisations are experiencing in recruiting new volunteers, this could add considerable pressure to existing volunteers who give their time to support people in crisis. This is not sustainable and could contribute to a further decline in volunteer participation.

Last week we published research showing that weekly participation in formal volunteering can lead to wellbeing benefits worth an estimated £1000 per person per year. 

This same research also found that the effect of volunteering on mental wellbeing for people with a disability or long-term health condition was seven times larger than for people without.

Despite these clear benefits, we are concerned that the announced reduction in welfare spend will prevent many people in receipt of benefits from pursuing volunteering.

Our ongoing research regarding the impact of the cost of living crisis on volunteering suggests that the capacity of many people to volunteer is increasingly diminished.

This is because of competing demands on their time and rising stress or anxiety regarding their finances. The planned changes to welfare spend will likely exacerbate this situation further, meaning many people in receipt of health-related benefits may feel unable to participate in an activity that is likely to improve their health and wellbeing.

As a result, we join many voices from the third sector in urging the Chancellor to rethink her plans around welfare spend.

FRASER OF ALLANDER INSTITUTE:

Spring Statement reaction: a second fiscal event of the year after all

The Chancellor may have tried to portray it otherwise, but her words in the Commons and the length of the scorecard of measures published by the OBR betray a different story: this really was a fiscal event, and a significant one at that.

It was also one where the forecasting process was nowhere as smooth as we hoped it might be given how much hay the Chancellor made out of strengthening the role of the OBR in the Autumn. Instead, we have seen a number of measures either uncertified or included only on a provisional basis, and with no time to evaluate their supply-side effects.

Given how long these measures have been speculated about, the last-minute tweaks and the scramble to announce further welfare reforms to make the sums add up to the £5bn in savings are pretty disheartening. It also makes us wonder about the reasons for announcing the headline amounts last week, before ultimate certification by the OBR.

It is not credible that the Chancellor or the Work and Pensions Secretary were not aware of the OBR’s concerns at the time of the announcement, and so we are left to wonder why figures that weren’t final were bandied about beforehand instead of being left for the appropriate fiscal event.

The underlying picture deteriorated significantly, and so spending cuts have filled the gap

As widely predicted, the Chancellor would have seen her fiscal rules broken had she not made significantly policy decisions, which collectively cut current spending by nearly £9 billion a year by 2029-30.

Chart: How the Chancellor restored her headroom

Source: OBR

Debt servicing costs are the main reason for the deterioration. Higher market interest rates raised the cost of servicing government by just over £10 billion by the end of the decade, more than wiping the starting headroom. Faced with this, and after staking her credibility on complying with the fiscal rules, the Chancellor decided to mostly lean on the spending side of the ledger to essentially get back to where she started.

This means a heavily backloaded set of policy decisions, with spending cuts coming from 2027-28 onwards. Changes to incapacity and disability benefits mostly affect spending from then on, by £1.8 billion in that year and rising to £4.6 billion by 2029-30.

Changes to the path of day-to-day departmental spending also rise to over £5 billion by 2029-30, although some of that is offset by specific investment programmes such as employment support, DWP delivery and HMRC compliance. On net, current departmental spending has been cut by £3.6 billion by 2029-30 relative to plans.

There have also been some increasing in the tax take. Much of it is from compliance activity and tax debt collection, although there are also additional council tax increases allowed in England and increases to passport and visa fees. Receipts are higher by £2.3 billion by 2029-30 because of measures.

But the Chancellor has had to run just to stand still. She is just as close to missing her fiscal rule as she was in October, and that leaves her exposed to any weaknesses or market movements between now and the Autumn. Things may well turn out for the better – but that is far from guaranteed, and it’s as close to a 50-50 bet as it gets.

Chart: Headroom against the main fiscal target since 2010

Source: OBR

What do the announcements mean for the Scottish Budget?

In the very short-term, there is a small amount of additional funding (£28 million) for the Scottish Government in 2025-26 due to a small increase in departmental spending at UK Government level.

Towards the end of the forecast, however, the picture is significantly more challenging in terms of what it means for Holyrood’s finances. The cuts in departmental budgets announced by the UK Government – even after accounting for some consequentials from employment support programmes and DWP delivery of welfare reforms – mean significant reductions in funding for the Scottish Government relative to what was previously included in the forecasts. Of particular significance are the £200 million and £435 million cuts in implied funding for the Scottish Budget in 2028-29 and 2029-30.

The current forecast points to the PIP reforms reducing the block grant adjustment for social security devolution by increasing amounts, from £177 million in 2027-28 to £455 million in 2029-30. This is in line with what we discussed in recent blogs.

Put together, and in the absence of any other changes, the Scottish Budget would be around £900 million worse off on the current side in 2029-30 than previously projected. On the other hand, some additional capital spending on areas which are devolved in Scotland – so aside from the defence spending increases – are expected to raise the Scottish Government’s capital budget by nearly £250 million by 2029-30 relative to current plans.

Chart: Effects of the Spring Statement measures on the Scottish Budget

Source: OBR

There’s still much we don’t know about the welfare reforms

One key policy change from last week’s Green Paper that the OBR have not been able to cost is the removal of the Work Capability Assessment (WCA) that currently determines whether a person is eligible for the Universal Credit (UC) health element. The UK Government have proposed that the PIP assessment will be used instead.

The OBR note the absence of key policy detail, including how entitlement will operate in Scotland where PIP is being phased out. They do state that they expect the policy to have a “material” fiscal impact, both on spending on UC but this could be offset by an increase in people claiming PIP. The labour market response of this (as with most of the other Green Paper policies) is also yet to be analysed by the OBR.

These changes will directly impact on people in Scotland as UC is a reserved policy, but as already noted, how this will happen given that PIP will soon not exist in Scotland, is unknown. The number of people impacted could be significant. The Scottish Government could mitigate this impact through its own social security top up powers but, as with the recently announced mitigation of the two-child limit in UC, would need to be able to find the money to do so from within its own budget.

But distributional analysis shows significant numbers of people will be worse off

Alongside the Spring Statement documents, the UK Government also update their distributional analysis (the differential impact of policies on poorer, middle, and higher income households). The impact of the Spring Statement, the policies from the Spring Statement are added to the policies from the Autumn Statement, making it difficult to isolate the impact of the Spring Statement, although the regressive nature of the welfare measures is clear to see: those in the lower half of the income distribution are facing most of the cuts.

Separately, the UK Government has produced a statement on the impact of the health and disability reforms.

This makes for sobering reading. The impact of changes to the eligibility for PIP will affect 800,000 people who will no longer be eligible for the Daily Living component. They note a further 150,000 people will not receive Carer’s Allowance of the UC Carer element as a result. These numbers are for England and Wales only given that disability benefits are devolved.

These results, on their own, will increase the number of working age people in poverty by 250,000 and 50,000 children. The UK Government are careful to say that these estimates do not account for any employment impact of those who lose benefits subsequently moving into work, and we will need to wait for the OBR to judge on the strength of these employment effects to understand the potential for offsetting of these numbers.

The reduction and or freezing of the UC health element will affect Scottish claimants as well as those in England and Wales. 2.25 million people who are current claimants will be affected by the freeze and 730,000 new claimants will receive the new lower rate and freeze. A further 50,000 working age people will be in poverty as a result of these changes.

There is as yet no analysis of the impact of the abolition of the Work Capability Assessment in UC, and the only impact that is shown is the reversal of a 2023 change to the descriptors in the Work Capability Assessment, which will not apply given the decision to abolish it.

We’ll have to wait until the OBR has been able to look at the whole policy package in aggregate before we understand the full scale of the impact both on the UK and Scotland. But it is clear from what we know so far that this is a package of measures that will raise poverty across the UK.

How does departmental spending look in historical context?

In October, the Chancellor announced significant increases in departmental spending. But we and others also noticed how frontloaded some of those announcements were.

This has been made even more so by the changes at this forecast to the latter years of the projections. Day-to-day departmental spending per person is now forecast to grow by a strong 3.4% in real terms in 2025-26, slowing to 1.5% in 2026-27 and remaining at 0.6% a year for the rest of the decade.

We’ll leave others to decide on words to characterise this path of spending. We’ll instead note that this leaves spending per person only 8% higher than it was in 2007-08. And as a share of national income – a better measure of affordability and of the Government’s prioritisation of the country’s resources – there is a slight increase in spending in the short-term. But day-to-day departmental spending then falls back by 0.4 percentage points by the end of the decade relative to its peak of 16.1 per cent of GDP in 2025-26 and 2026-27.

Chart: Resource departmental spending per person in real terms and as a share of GDP since 2007-08

Source: OBR, FAI analysis

Oxbridge to become Europe’s Silicon Valley?

Chancellor unveils new plans to deliver the Oxford-Cambridge Growth Corridor that will boost the UK economy by up to £78 billion by 2035

  • Rachel Reeves will today vow to go ‘further and faster’ to deliver the government’s Plan for Change to kick start economic growth and put more pounds in people’s pockets.
  • Chancellor to unveil plans to unleash the potential of the Oxford-Cambridge Growth Corridor that will add up to £78 billion to the UK economy according to industry experts, catalysing growth of UK science and technology.
  • Comes after Chancellor last week announced National Wealth Fund and Office for Investment will take new approaches to spur regional growth across the UK.

Chancellor Rachel Reeves will today vow to go “further and faster” to kick start the economy, as she unveils new plans to deliver the Oxford-Cambridge Growth Corridor that will boost the UK economy by up to £78 billion by 2035 according to industry experts.

In a speech in Oxfordshire, the Chancellor will tell regional and business leaders that economic growth is the number one mission of this government and its Plan for Change. She will declare that Britain’s economy has “huge potential” and is at the “forefront of some of the most exciting developments in the world like artificial intelligence and life sciences.”

She will back the redevelopment of Old Trafford and will review the Green Book – the government’s guidance on appraisal – in order to support decisions on public investment across the country, including outside London and the Southeast.

The speech comes after the Chancellor last week announced a new approach for the National Wealth Fund (NWF) and the Office for Investment (OfI) to work with local leaders to build pipelines of incoming investment and projects linked to regional growth priorities. This includes the NWF trialling Strategic Partnerships in Greater Manchester, West Yorkshire, West Midlands, and Glasgow City Region and the OfI piloting an approach in the Liverpool City Region and the North East Combined Authority to connect their regions to central government and industry expertise in order to unlock private investment.

Reeves will say “low growth is not our destiny, but that economic growth will not come without a fight. Without a government that is on the side of working people. Willing to take the right decisions now to change our country’s course for the better.”

The Chancellor is expected to say: “Britain is a country of huge potential. A country of strong communities, with local businesses at their heart.

“We are the forefront of some of the most exciting developments in the world like artificial intelligence and life sciences. We have great companies based here delivering jobs and investment in Britain.

“And we have fundamental strengths – in our history, our language, and our legal system – to compete in a global economy.

“But for too long, that potential has been held back. For too long, we have accepted low expectations, accepted stagnation and accepted the risk of decline. We can do so much better.

“Low growth is not our destiny. But growth will not come without a fight. Without a government that is on the side of working people. Willing to take the right decisions now to change our country’s course for the better.

“That’s what our Plan for Change is about. That is what drives me as Chancellor. And it is what I’m determined to deliver.”

In her speech the Chancellor will announce:

  • The Environment Agency has lifted its objections to a new development around Cambridge that could unlock 4,500 new homes and associated community spaces such as schools and leisure facilities as well as office and laboratory space in Cambridge City Centre. This was only possible as a result of the government working closely with councils and regulators to find creative solutions to unlock growth and address environmental pressures.
  • That the government has agreed for water companies to unlock £7.9bn investment for the next 5 years to improve our water infrastructure and provide a foundation for growth. This includes nine new reservoirs, such as the new Fens Reservoir serving Cambridge and the Abingdon Reservoir near Oxford.
  • Confirming funding towards better transport links in the region including funding for East-West Rail, with new services between Oxford and Milton Keynes this year and upgrading the A428 to reduce journey times between Milton Keynes and Cambridge.
  • Prioritisation of a new Cambridge Cancer Research Hospital as part of the New Hospitals Programme bringing together Cambridge University, Addenbrookes Hospital and Cancer Research UK.
  • Support for the development of new and expanded communities in the Oxford-Cambridge Growth Corridor and a new East Coast Mainline station in Tempsford, to expand the region’s economy.
  • That she welcomes Cambridge University’s proposal for a new large scale innovation hub in the city centre. As the world’s leading science and tech cluster by intensity, Cambridge will play a crucial part in the government’s modern Industrial Strategy.
  • A new Growth Commission for Oxford, inspired by the Cambridge model, to review how best we can unlock and accelerate nationally significant growth for the city and surrounding area.
  • Appointment of Sir Patrick Vallance as Oxford-Cambridge Growth Corridor Champion to provide senior leadership to ensure the Government’s ambitions are delivered. 

The Chancellor is expected to say: “Oxford and Cambridge offer huge economic potential for our nation’s growth prospects.

“Just 66 miles apart these cities are home to two of the best universities in the world two of the most intensive innovation clusters in the world and the area is a hub for globally renowned science and technology firms in life sciences, manufacturing, and AI.

“It has the potential to be Europe’s Silicon Valley. The home of British innovation.

“To grow, these world-class companies need world-class talent who should be able to get to work quickly and find somewhere to live in the local area. But to get from Oxford to Cambridge by train takes two and a half hours.

“There is no way to commute directly from towns like Bedford and Milton Keynes to Cambridge by rail. And there is a lack of affordable housing across the region.

“Oxford and Cambridge are two of the least affordable cities in the UK. In other words, the demand is there but there are far too many supply side constraints on economic growth in the region.”

Designed to take advantage of the region’s unique strengths and potential, the announcements are further evidence of the government’s modern Industrial Strategy in action as it seeks to create the right conditions to increase investment in our leading growth sectors like life sciences, artificial intelligence and advanced manufacturing.

She will add: “Taken together, these announcements show that for the first time a government is providing real leadership to deliver this project with a clear strategy for the entire region backed by funding for the housing and infrastructure we so badly need.“

The speech comes after the Chancellor last week announced a package of investment reforms to spur regional growth across the UK.

Rachel Reeves set out a new approach for the National Wealth Fund (NWF) and the Office for Investment (OfI) to work with local leaders to build pipelines of incoming investment and projects linked to regional growth priorities.

Putting local knowledge and leadership at the forefront, there will be tailored strategies for each region to ensure investment matches local needs and drives sustainable growth.

Putting the government’s Plan for Change into action, the Chancellor set out that the goal is to harness growth everywhere to rebuild Britain and usher in a decade of national renewal. Measures included the NWF trialling Strategic Partnerships in Greater Manchester, West Yorkshire, West Midlands, and Glasgow City Region and the OfI piloting an approach in the Liverpool City Region and the North East Combined Authority to connect their regions to central government and industry expertise in order to unlock private investment.

Science Minister, Lord Patrick Vallance said: “The UK has all the ingredients to replicate the success of Silicon Valley or the Boston Cluster but for too long has been constrained by short termism and a lack of direction.

“This government’s Plan for Change will see an end to that defeatism. I look forward to working with local leaders to fulfil the Oxford-Cambridge corridor’s potential by building on its existing strengths in academia, life sciences, semiconductors, AI and green technology amongst others.

“Together we will build the infrastructure and partnerships needed to join up this region’s academia, investors and business so that we can boost growth, deliver innovations and create new jobs that improve all our lives.”

Transport Secretary, Heidi Alexander said: “Well connected communities are a cornerstone for growth. East West Rail will not only provide better links and lasting benefits to Oxford and Cambridge, but to all the surrounding areas.

“I’m also delighted to announce a brand new station at Tempsford, which will be game changing for the region – allowing a new community and businesses to grow, unlocking faster and smoother access to opportunities, and delivering on the Government’s Plan for Change.”

S2G4KH Starling murmuration at RSPB Ham Wall, Avalon Marshes, Somerset

Responding to Rachel Reeves’ speech today on economic growth Roger Mortlock, CPRE countryside charity chief executive, said:

On airport expansion and the Lower Thames Crossing 

‘The single biggest threat to the countryside is climate change. If the government expands Heathrow, Luton, City and Gatwick airports, the increase in carbon emissions will make a mockery of its commitment to reaching net zero by 2030.   

‘Airport expansion will do nothing to boost UK growth. There has been no net increase in air travel for business purposes or in jobs in air transport since 2007. Recent research from the New Economic Foundation indicates that airport expansion will drive significant tourism revenue abroad, not bring it to the UK. To create the jobs of the future we need investment in low-carbon industries and transport, not more unsustainable expansion of the UK’s airports.   

‘CPRE local groups in Bedfordshire, Hertfordshire, London and Sussex have been at the forefront of campaigns to prevent further airport expansion. If implemented, these proposals would have a devastating impact on some of the UK’s most valuable agricultural land, vital wildlife habitats and green spaces close to millions of people’s homes.’

On the Lower Thames Crossing 

‘The proposed Lower Thames Crossing would also drive-up levels of unsustainable travel at a time when funding should be directed into sustainable public transport instead. CPRE Kent has highlighted how the crossing’s environmental and economic impacts on the local area would far outweigh any supposed benefits.’

On zonal planning reforms 

‘We welcome the government’s plan to support the construction of more homes close to existing transport hubs, particularly in our towns and cities. Provided that they are genuinely affordable and built on brownfield land, these homes could help unlock growth by providing sustainable places to live close to where people already live, work and go to school. 

‘Building more homes close to transport hubs must not be allowed to undermine the Green Belt, one of this country’s most successful spatial protections with huge potential to help address the climate and nature emergencies.’   

On the planning regime for Nationally Significant Infrastructure Projects 

‘It’s clear we’ve got to build a clean energy grid fit for the future but the best way to achieve this is with local communities involved from the start.  

‘To speed up the planning system, the government should deliver on its commitment to fund hundreds of new planning officers. 

‘The UK could learn from countries such as Ireland and Australia, which involve communities in decision making from the beginning, reducing the need for lengthy and expensive legal processes without eroding democracy. For everyone’s sake, we should be building consensus, not dismissing people with real ideas and solutions as ‘blockers’.

Pension reforms to go further to unlock billions to drive growth and boost working peoples’ pension pots

  • Prime Minister and Chancellor to tell leading CEOs that Britain is back and open for business.
  • Changes to pension rules will allow trapped surplus funds to be invested in the wider economy, fuelling economic growth.
  • Move is part of government action to remove blockages that are stopping growth – from regulation to planning processes.

Working people and businesses are set to benefit from new rules that will give more flexibility over how occupational defined benefit pension schemes are managed, as the government continues to remove blockages that are inhibiting its growth agenda that will improve lives of working people across the UK. 

Hosting a meeting with leaders of Britain’s biggest businesses in the City of London today (Tuesday 28 January), the Prime Minister and the Chancellor will set out the details of changes and tell some of the country’s leading CEOs that Britain is back and open for business.

At the roundtable, the PM and Chancellor will outline how restrictions will be lifted on how well-funded, occupational defined benefit pension funds that are performing well will be able to invest their surplus funds. 

This follows action taken by the government last week to bring a renewed focus on growth from some of the UK’s biggest regulators, a shake-up to legal challenges on planning applications, and new “brownfield passports” to speed up housing in commuter hotspots.

Prime Minister, Keir Starmer said: “The number one mission of my government is to secure growth, drive higher living standards for everyone, and get more money into people’s pockets.

“To achieve the change our country needs requires nothing short of rewiring the economy. It needs creative reform, the removal of hurdles, and unrelenting focus. Whether it’s how public services are run, regulation or pension rules, my government will not accept the status quo.

“Today’s changes will unlock billions of investment, pushing forward in delivering my Plan for Change.”

Chancellor of the Exchequer, Rachel Reeves said: “I know this government and businesses are united on growth being the top priority for our economy, which is why I am fighting every day to tear down the biggest barriers to growth, taking on regulators, planning processes and opposition to this urgent mission.“

The Prime Minister and Chancellor will tell CEOs from some of the UK’s most successful companies that that the government is seeking to create the best possible conditions for the private sector to thrive.

They will promise to work in partnership with businesses, to deliver high-quality jobs across the country, and the economic growth that will fund the schools, hospitals and roads that we all rely on.

Pension trustees and the sponsoring employers could then use this money to increase the productivity of their businesses – to boost wages and drive growth or unlock more money for pension scheme members. 

High growth and more productive businesses boost the size of the economy which in turn will fund our vital public services.

This more efficient approach demonstrates that the government has been listening to business, and will give businesses more flexibility, allowing trapped surplus funds to be invested into the wider UK economy, or given to scheme members as additional benefits.

Where trustees agree to share a portion of scheme surplus with a sponsoring employer, the employer may choose to invest these funds in their core business, for example to purchase equipment or supplies, and/or provide additional benefits to members of the pension scheme.

Approximately 75% of schemes are currently in surplus, worth £160 billion, but restrictions have meant that businesses have struggled to invest them.

These reforms build on the Chancellor’s Mansion House reforms which will create pension megafunds as part of the biggest set of pension reforms in decades, unlocking billions of pounds of investment in exciting new businesses and infrastructure and local projects.     

Over £1.1 trillion is held by pension funds in the UK and defined contribution pension schemes are set to manage £800 billion worth of assets by the end of the decade. This Government is determined to encourage these pension funds to deliver investment and drive economic growth – which is the only way to make people better off.    

Jonathan Lipkin, Director of Policy, Strategy & Innovation at the Investment Association said: “Unlocking surplus capital from defined benefit schemes has the potential to both boost UK growth by opening up investment opportunities for companies and their stakeholders, as well as the possibility of higher pensions for scheme members. 

“With around £1.1 trillion in assets, defined benefit schemes already make a significant contribution to the funding of the UK economy and public services. 

With the right guardrails in place, the government’s proposals could help channel more funding into the economy, by enabling schemes to invest more widely and take on greater risk, while allowing for members to receive an uplift to pension benefits.

Zoe Alexander, Director of Policy and A2dvocacy at the Pensions and Lifetime Saving Association, said: “The PLSA backs surplus release, with the right protections in place to ensure member benefits are secure. 

“Surpluses could be used to increase DB scheme benefits or could be redirected to fund contributions to sponsoring employers’ defined contribution workplace schemes.

“Lowering the legislative threshold for allowing returns of surplus could potentially encourage trustees, in conjunction with their employers, to adopt a more ambitious mindset and take on slightly riskier investment strategies for their DB assets, including greater investment in UK assets.”

Patrick Heath-Lay, Chief Executive Officer for The People’s Pension, said: “It is positive news to see the government is looking at the pension industry as a whole. This will help unlock more of the £2.9trillion that is held in UK pension savings, to benefit savers and the economy alike.

“We look forward to other pension schemes following our plans and outlining how they will invest in private markets.”

The roundtable discussion will focus on the government’s partnership approach to growth with business, including how regulation can better support the Growth Mission, and the role of business in achieving the UK’s ambitions in AI which the Prime Minister unveiled earlier this month. Every regulator has a role to play in the Growth Mission and the Chancellor is hosting a series of roundtables with the 17 regulators that the Prime Minister wrote to in December, to discuss their proposals to support growth in the coming year. 

The meeting with CEOs comes days after the Chancellor’s return from the World Economic Forum, where she pitched Britain’s investment credentials and let global business leaders know that the UK is open for business again.

She championed early reforms to planning, pensions, and regulation that make it easier to do business in Britain and remove barriers investors from overseas face.

On Wednesday, the Chancellor will make a speech where she will set out plans to push through further planning reforms to get Britian building again, rip up regulatory barriers so we can encourage more investment into the UK and announcements to boost trade and investment.

The government will set out the details of the surplus policy in its response to the Options for Defined Benefits consultation, due this Spring.

Industrial Strategy launch to ‘hardwire stability for investors’

  • The Business Secretary and Chancellor announce steps to deliver long-term growth through a modern Industrial Strategy, including appointing a Chair of the new Industrial Strategy Advisory Council 
  • The Industrial Strategy will create a pro-business environment and play to the UK’s strengths, focusing on eight growth driving sectors including creative industries and financial services  
  • Business Secretary Jonathan Reynolds pledges an end to instability “our modern Industrial Strategy will hardwire stability for investors and give industry the confidence to plan for the next 10 years and beyond” 
  • Clare Barclay, CEO of Microsoft UK, will chair government’s new Industrial Strategy Advisory Council, which will provide expert advice developed in partnership with business, unions, and stakeholders from across the UK 
  • Announcements come ahead of International Investment Summit which will bring together business leaders from around the globe to boost investment and growth 
  • Government is also asking for business to help shape the industrial strategy with a green paper to develop the plans in partnership 

The next generation of British industry has been fired-up and readied to reignite our industrial heartlands and kickstart economic growth, as the Government launches the first Industrial Strategy in seven years. 

Business and Trade Secretary Jonathan Reynolds and the Chancellor of the Exchequer Rachel Reeves have published a green paper to kickstart delivery of the Government’s modern Industrial Strategy. The strategy will drive long-term growth in key sectors that is sustainable, resilient and distributed across the country.   

Announcing the eight growth sectors will be the focus of the Strategy, alongside naming the new Industrial Strategy Advisory Council’s chair, the Business Secretary has promised to ‘give investors a ten year plan to choose Britain’.  

The key sectors the government will focus its modern Industrial Strategy are on advanced manufacturing; clean energy industries, creative industries; defence; digital and technologies; financial services; life sciences; and professional and business services. 

The green paper, which will be published tomorrow on the day of the International Investment Summit, will bring together UK leaders, high-profile investors and businesses from across the world. There, Reynolds is expected to tell delegates the Industrial Strategy will put Britain back on the global stage and help attract investment into the most productive parts of the UK economy.  

Business and Trade Secretary Jonathan Reynolds MP said: “Our modern Industrial Strategy will hardwire stability for investors and give them the confidence to plan not just for the next year, but for the next 10 years and beyond.  

“This is the next step in our pro worker, pro business plan which will see investors and workers alike get the security and stability they need to succeed. 

“Clare’s wealth of talent and experience will help ensure the Industrial Strategy delivers its mission of unleashing the potential of high productivity sectors to spur growth, spread wealth, and drive-up employment across the UK.”

Chancellor of the Exchequer Rachel Reeves MP said: “I have never been more optimistic about our country’s potential. We have some of the brightest minds and greatest businesses in the world. From the creative industries and life sciences to advanced manufacturing and financial services. 

“This Government is determined to deliver on Britain’s potential so we can rebuild Britain and make every part of the country better off.”

Clare Barclay, CEO of Microsoft UK, will chair the Industrial Strategy Advisory Council. The Council will inform the development of the Industrial Strategy through its expertise and latest evidence, working with business, trade unions, devolved governments, local leaders, academia and stakeholders.  

In the King’s speech the Government committed to putting the Council on a statutory footing – giving it powers and responsibilities and ensuring it will be permanent and independent.  

Ahead of establishing a statutory body, we are introducing an interim advisory Council. The first Council meeting and announcement of full membership is expected in the coming weeks.   

Microsoft UK CEO Clare Barclay said: “As Chair of the Industrial Strategy Advisory Council, I will ensure the Council provides a clear and strong voice on behalf of business, nations, regions, and trade unions, as we invest for the future to ensure that our prosperity is underpinned by robust growth in key sectors right across the country. 

“Whilst we fully embrace the industries of today, we must also have a clear plan for future growth, and the Advisory Council will play a central role in shaping and delivering this plan.”

The government has also identified eight growth-driving sectors for the Industrial Strategy, focusing on sectors the UK excels in today and will excel tomorrow.  

Over the last 25 years, the top 30% of sectors ranked by productivity in 1997 were responsible for generating roughly 60% of the economy’s entire productivity growth. That’s why our Industrial Strategy will channel support to sectors and geographical clusters that have the highest growth potential for the next decade. 

Our strategy will create a pro-business environment to capture a greater share of internationally mobile investment in strategic sectors and motivate domestic business to boost their investment and scale up their growth. 

Businesses up and down the country will also be invited to respond to the Industrial Strategy Green Paper, which will be published tomorrow.  

The consultation will provide stakeholders with the opportunity to inform the Strategy’s continued development and ensure it delivers tangible impact to people and communities right across the UK.  

Views are sought from business, international investors, unions and any other interested parties, on the overall vision, approach to growth sectors and the policy levers needed to drive investment.   

Make UK CEO Stephen Phipson said: “We live in a world which is massively different to a decade ago and simply leaving the economy and, industrial strategy, to the free market is an ideology which is long past its sell by date.

“This is a welcome first step in addressing the achilles heel of the economy which has left the UK an outlier among advanced countries. It sets out a clarity of vision for how the resources of Government and, in particular, each department can be convened towards a single objective of long term growth across all regions.  

“With the welcome announcement of the Industrial Strategy Advisory Council Chair and, the Council being put on a statutory footing, industry will no longer fear the constant chop and change in policy we have seen over the last decade or so and can focus on the long term – it is important that the Government is delivering on its promises.”

WPP CEO Mark Read said: “WPP supports the Government’s objective to create and foster an investment environment that drives long-term growth.

“As a global marketing services company, we believe that the UK’s world-leading creative industries, powered by new technologies like AI and exceptional talent, can continue to play a key role in further advancing the UK’s investment case on the global stage.”

Airbus UK Chairman John Harrison said: “Airbus welcomes the inclusion of advanced manufacturing in the Government’s Industrial Strategy as a vital opportunity to build on the successful partnership between government and the aerospace sector.  

“As one of the most technologically advanced businesses in the UK, we also welcome the strong focus on innovation, which is crucial to driving future growth and maintaining the UK’s global competitiveness in aerospace and defence.”

For businesses to invest and thrive they need confidence in their supply chains. So, we are also establishing a new supply chains taskforce in government that will work to assess where supply chains critical to the UK’s economic security and resilience – including those in the growth driving sectors outlined in the industrial strategy – could be vulnerable to disruption.

The taskforce will ensure that government works with business to address these risks, building the conditions required to deliver secure growth. 

The UK Government wants the UK to be a prime investment opportunity for business. The Industrial Strategy, and the Industrial Strategy Advisory Council, will be key to giving investors the solid foundation on which to build. 

Prime Minister puts investment at the heart of first Council of the Nations and Regions

Leaders from across the UK will come together in Scotland next Friday (11 October) as the Prime Minister convenes the first Council of Nations and Regions.

  • Prime Minister convenes leaders from across the UK for Council of the Nations and Regions in Scotland on Friday 11 October.
  • Council to focus on maximising opportunities to deliver investment and growth across the UK.
  • Comes as speakers are confirmed for the UK Government’s inaugural International Investment Summit.

Leaders from across the UK will come together in Scotland next Friday as the Prime Minister convenes the first Council of Nations and Regions. 

Three days ahead of the International Investment Summit, the first Council will focus on investment and growth and is a key moment to ensure everyone is collectively playing their part to maximise the opportunity the Summit presents for the whole of the UK.  

The Council brings together First Ministers, Northern Ireland’s First Minister and Deputy First Minister and regional Mayors from across England, as the UK Government forges new partnerships, resets relationships and seizes the opportunity to secure long term investment with the aim of boosting growth and living standards in every part of the UK. 

Prime Minister Keir Starmer said:  I’m determined to bring forward a new era of stability, trust, and partnership with businesses, investors, Devolved Governments, and local leaders to boost the economy and restore the UK’s reputation one of the best places in the world to do business.

“I’ve set out that we will be doing things differently, and that’s exactly why we are delivering our promise to convene the first Council of the Nations and Regions as we work as one team to maximise opportunities ahead of the Investment Summit.

“No more talking shops of the past. Genuine, meaningful, and focused partnership to change the way we do business, redefine our position on the world’s stage, and unlock the whole of the UK’s untapped potential to make everyone, everywhere better off.”

Tracy Brabin, Mayor of West Yorkshire, said: “This new era of genuine partnership working between the Government and Mayors will help us to unleash the potential of our great regions and boost growth. 

“Mayors are champions of their regions at home and abroad, attracting investment, creating good jobs, and putting more money in people’s pockets. Our investments in transport, skills and homes, create the right environment for growth by connecting businesses to the talent and finance they need to succeed.

“Through partnership working and by listening to business, we’ll deliver the long-term investment our country needs to shake off stagnation and face the future with confidence.”

Local leaders as well as Heads of the Devolved Governments have also been invited and are expected to attend the International Investment Summit to forge new partnerships with businesses to unlock growth in every corner and every community across the UK.

The UK Government led inaugural International Investment Summit is expected to be opened by the Prime Minister where he will take part in an in conversation event with Eric Schmidt – the pioneer behind Google’s transformation from start up to one of the world’s most powerful companies. 

 Eric Schmidt, Former CEO & Chairman of Google KBE said: “Artificial intelligence represents one of the most transformative technologies of our time. It will change how economies everywhere function, and it will determine which countries stay competitive in the decades to come.

“Last year, when the UK hosted the first global summit on AI safety, the country displayed its commitment to being a leader in responsible innovation. Now, it has the opportunity to go even further and articulate a vision for the future where the UK is a hub for world-class talent.

“I’m looking forward to discussing with the Prime Minister how we can drive even greater investment in research and education to ensure the UK stays at the forefront of these technological breakthroughs.”

The Summit will gather UK leaders, high-profile investors and businesses from across the world at a historic venue in central London – with confirmed speakers including Ruth Porat President & Chief Investment Officer, Alphabet and Google, Alex Kendall, CEO of Wayve and Bruce Flatt, CEO of Brookfield Asset Management. 

The event will provide an opportunity for the Government to establish enduring partnerships with businesses to boost investment in the UK and to give investors the certainty and confidence they need to drive growth.  

It will be sponsored by Barclays, HSBC, Lloyds, M&G plc, Octopus Energy, and TSL.   

Today’s announcement follows the Government confirming funding this week to launch the UK’s first carbon capture sites in Teesside and Merseyside.

In a boost for economic growth and protecting the environment, the new carbon capture and CCUS enabled hydrogen projects will create 4,000 new jobs, sustain important British industry, and help remove over 8.5 million tonnes of carbon emissions each year – the equivalent of taking around 4 million cars off the road.

C.S. Venkatakrishnan, Group Chief Executive, Barclays said: The International Investment Summit is an important opportunity for the Government to build further investor confidence based on its priorities for driving UK economic growth.   

“The UK’s stability, skills and history of innovation make it an attractive investment destination. The private sector has an important supporting role in helping the economy.  Barclays has made its largest ever capital investment in the UK to drive economic growth and we continue to connect both domestic and international investors with opportunities across the country.”

Georges Elhedery, Group CEO, HSBC said: “From SMEs to multinational corporates, UK companies’ enterprise, expertise and innovation present huge opportunities for partnership and economic growth.

“With our long history of helping UK customers trade with the world and international customers to invest in the UK, HSBC is pleased to support the International Investment Summit.”

Charlie Nunn, Group Chief Executive, Lloyds Banking Group said: “The UK business environment remains an innovative and dynamic destination for investors and global talent, and we are proud to support the International Investment Summit.

“Lloyds works with corporate and institutional clients from the UK and across the world – generating jobs and growth, attracting inward investment, and increasing exports.  These are essential ways we are helping Britain prosper.”

Andrea Rossi, CEO, M&G plc said: “The UK has a clear national mission to drive economic growth and back wealth creation across every region of the country.

“At M&G, we have actively invested in the UK for 175 years, driving progress and helping people, businesses and communities thrive. We continue to support a range of companies, invest in critical infrastructure and play our part in boosting regional economies.

“The International Investment Summit is a crucial moment to put the UK back on the investor map, showcase market opportunities and reinforce how business and government can work in partnership.”

Greg Jackson, CEO of Octopus Energy said: “The UK is the vanguard of green innovation, brimming with the talent and technology needed to accelerate the global energy revolution.

“By investing in British renewables and clean tech, we’re not just creating greener energy for people but driving the solutions that will power the world. The International Investment Summit is a great opportunity to showcase the UK’s climate leadership and revolutionise the sector.”

Jackie Wild, TSL Group CEO said: “We are delighted to be a partner to the International Investment Summit. We founded TSL more than two decades ago with the vision of creating a British export model of technical engineering and construction excellence.

“We are proud to be delivering projects for international clients across the world to power the fourth industrial revolution. 

“In addition, through the creation of SmartParc, our cutting edge, investable platform for food industry change, we continue to facilitate inward investment into the UK’s food industry to safeguard our national food security.”

Ian Murray comments on Scotland’s latest GDP figures

Scotland’s onshore GDP grew by 0.3% in July 2024 according to statistics announced by the Chief Statistician yesterday. This follows no growth in June 2024 (revised up from -0.3%).

In the three months to July, GDP is estimated to have grown by 0.3% compared to the previous three month period. This indicates a slight decrease in growth relative to the increase of 0.6% in 2024 Quarter 2 (April to June).

The two industries which made the biggest contribution to overall GDP growth in July were Manufacturing and Information and Communications Services, both of which contributed 0.1 percentage points of growth to headline GDP.

The monthly statistical publication and data is available from the Scottish Government’s website.

Ian Murray underlines Westminster government mission for growth

The latest Scottish GDP stats were published yesterday here for the month of June and here for Q2 of 2024.

Responding to the latest figures, Scottish Secretary Ian Murray said: “Scotland is critical in the UK Government’s mission for economic growth, as the Chancellor underlines today in Glasgow where she’ll meet with key members of the business community to turbocharge Scotland’s regeneration.

“Rebuilding is at the root of everything we do but the £22billion black hole in spending left by the previous government – the worst economic inheritance of any incoming government since the Second World War – means that tough decisions are ahead to achieve stability.

“We are making work pay, ensuring the national minimum wage is a true living wage. And with the end of exploitative zero-hours contracts, workers will have increased job security.

“Backed by £8.3bn of UK Government investment, Scottish-based GB Energy will bring jobs and opportunity for all parts of the UK and trade talks have resumed globally to forge stronger links with our international business partners.”

  • Scotland’s onshore GDP is estimated to have fallen by 0.3% in June. This follows growth of 0.2% in May.
  • In the three months to June (Quarter 2), GDP is estimated to have grown by 0.6% compared to the previous three month period (Quarter 1). This is a slight increase on the Quarter 1 growth rate of 0.5%.

‘Two great countries – brought closer together than ever before’

KEIR STARMER’s SPEECH IN BERLIN YESTERDAY

Thank you. And can I first express my sincere condolences for the shocking attack in Solingen last week. Our country knows what it’s like to suffer such senseless and despicable acts and our thoughts are with all the families affected by this terrible event. 

And Olaf – thank you. It’s fantastic to be with you here in Berlin. 

Not, alas, my first visit here as Prime Minister. Football, it turns out… 

Decided to visit it’s second home in Spain, this time. But anyway – it was still an incredible experience… 

And a showcase for the fantastic hospitality of this great nation.  

So thank you for hosting yet another episode in English footballing trauma! I’ve been through a lot.

Anyway – I’m delighted to be back at this moment of opportunity for our two countries. 

Olaf – on every occasion we’ve met, we’ve talked about our ambitions for the future. Our values of security, prosperity, respect and our shared determination to harness the power of government for the service of working people.

That is what we are doing today. 

A new UK-Germany Treaty. A once in a generation chance to deliver for working people in Britain and in Germany. 

A new agreement… A testament to the depth and potential of our relationship. 

With deeper links on science, technology, development, people, businesses, culture. 

A boost to our trading relations.

Germany – of course, already the UK’s second largest trading partner in the world. And through that – a chance to create jobs here and in the UK and deliver that most precious of goods, for both our countries … Economic growth. 

Let me be clear – growth is the number one mission of my Government.  

And what we understand, clearly is that building relationships with our partners – here in Germany and across Europe is vital to achieving it. 

That is what our agreement today represents – the chance that we have. 

We’ll also deepen cooperation on shared social challenges. For example, on illegal migration. Because we cannot smash the smuggling gangs who perpetrate this vile trade without the help of our partners.

And I’m really glad that we had substantive discussions today about how we tackle the smuggling gangs and agreed to develop a joint action plan to tackle illegal migration. 

So we will renew our commitment to the Calais Group – enhance our intelligence sharing on organised immigration crime. but also – increase collaboration on tackling climate change. 

An important goal for the planet, of course for greater energy security, but also – for tackling the drivers of challenges like illegal migration at source.

 And finally – at the heart of this Treaty will be a new Defence Agreement. An agreement that builds upon our already formidable defence co-operation but which expands that relationship to face the threats of a volatile world, together. 

That of course means a shared resolve to stand up for the security of our people and the wider European continent. 

And that begins with our unyielding support for Ukraine – we discussed that in some detail today. 

Because, as Europe’s largest contributors to Ukraine’s war efforts, and as the nations with the highest defence expenditure among European countries in NATO, we know only too well the debt we owe to the Ukrainian people who fight not just to defend themselves, but for all the people of Europe. 

So today – we reaffirmed our commitment to stand with Ukraine for as long as it takes. We also share a common commitment to resolve the crisis in the Middle East, and agree on:

…Israel’s right to self-defence, in compliance with International Humanitarian Law… 

…the need for de-escalation across the region; and for restraint and caution to be exercised…

Unfettered humanitarian access into Gaza…

…agreement to a ceasefire and release of all hostages…

…and the importance of working together towards a political solution based on the creation of a Palestinian State alongside a safe and secure Israel.

The only way to provide long-term peace and security for both Israelis and Palestinians.

That of course – is not an easy goal. But it is one that we are committed to pursuing, together. 

Because – as today shows – Britain can advance its interests much more effectively when we stand with our friends and partners.

This Treaty is part of a wider reset – grounded in a new spirit of co-operation… with our shared understanding that this will be developed at pace and that we hope to have agreed it by the end of the year. 

A Britain reconnected… Resetting our relationships… Rediscovering our common interest…Delivering for working people. 

Britain and Germany already have an incredible relationship. We invest billions in each other’s countries. Thousands and thousands of jobs are supported through trade.

And every year, millions of people travel between our two countries; exchanging ideas, collaborating, creating and connecting.  But today – we build on that … A bright new future for UK-German relations.

Two great countries – brought closer together than ever before. The strongest strategic partners in Europe and on the world stage.

Thank you so much for hosting us here today.

Britain is open for business: Chancellor visits North America in investment drive

  • Rachel Reeves to bang the drum for Britain in visit to New York City and Toronto this week.
  • Chancellor to share her vision for growth and champion UK sectoral strengths across financial services, clean energy and infrastructure to investors and CEOs.
  • Trip to build momentum for the International Investment Summit on 14 October.

Chancellor Rachel Reeves has visited New York and Toronto this week with the message that Britain is open for business.

She met with CEOs and senior representatives from major players across the US and Canada’s foremost industries, highlighting that early steps taken by the government to fix the foundations and restore economic stability makes the UK an attractive destination for investment.

Chancellor of the Exchequer Rachel Reeves: “I’ve wasted no time in my first month in office in taking the difficult decisions necessary to fix the foundations of our economy, so we can rebuild Britain and make every part of the country better off.

“That means restoring economic stability so we can attract the investment needed to create good jobs, boost wages, and improve opportunity across Britain.

“There is no credible plan for growth without private sector investment. That’s why I’m breaking down barriers at home and banging the drum for Britain abroad as we gear up to host the International Investment Summit.”

While in New York, the UK’s first female Chancellor of the Exchequer met with Wall Street leaders and host a reception to celebrate women in finance.

The US is the UK’s biggest financial services trading partner, with UK exports to the US valued at £23.4bn annually. The sector is at the heart of the government’s core mission to deliver sustainable economic growth as a jewel in the crown of the UK economy and one of its success stories, contributing almost 10% of UK GVA and employing 1.2 million people.

In Toronto, the Chancellor met with names in the world of clean energy and infrastructure. The government’s mission to make Britain a Clean Energy Superpower will bring opportunities for economic growth whilst helping the UK meet its target of clean power by 2030.

That mission has started in earnest with the creation of Great British Energy to partner with the private sector and secure the investment needed to accelerate the transition, the sweeping away of barriers to onshore wind farms, and a record £1.5 billion budget for this year’s renewable energy auction to get Britain building green.

During her time in the US and Canada, Reeves has pointed out that the government has moved quickly to create a stable environment where businesses have the confidence to invest in the UK.

This has included reform of a planning system that has long frustrated investment, ending the ban on on-shore wind and the establishment of a National Wealth Fund, backed by £7.3 billion to catalyse further private investment in our world-leading green and growth industries of the future.

The UK is already Europe’s leading hub for investment, with UK markets raising more capital than the next two highest European exchanges combined in 2023.

The Chancellor visited North America with a renewed purpose to build upon this, with it being announced yesterday that Britain is to play host to the International Investment Summit on 14 October.

In doing so, Ms Reeves is looking to deepen the strong economic relationship between Britain and the two North American countries.

The United States is the largest source of foreign investment in the UK and the UK is the third largest investment destination for Canadian companies, whom invested more than $73 billion of FDI stock in 2021.

Chancellor vows ‘big bang on growth’ to boost investment and savings

BETTER-OFF BRITAIN?

  • Chancellor launches landmark review to boost investment, increase pension pots and tackle waste in the pensions system.
  • New Pensions Bill confirmed in King’s Speech could boost pension pots by over £11,000, with further consolidation and broader investment strategies to potentially deliver higher returns for pensions.
  • An investment shift in defined contribution schemes could deliver £8 billion of new productive investment into the UK economy.
  • Action will be taken to unleash the full investment might of the £360 billion Local Government Pension Scheme to make it an engine for UK growth.

The Chancellor Rachel Reeves has announced a landmark pensions review as part of the new Government’s mission to ‘boost growth and make every part of Britain better off’.

Under plans unveiled by the new Chancellor, billions of pounds of investment could be unlocked in the UK economy from defined contribution schemes alone and pension pots for savers in defined contribution schemes could be boosted by over £11,000.

The Review will also, working closely with the Minister of State at MHCLG, look at how to unlock the investment potential of the £360 billion Local Government Pensions Scheme, which manages the savings of those working to deliver our vital local services, as well as how to tackle the £2 billion that is being spent on fees.

The announcement comes ahead of the first Growth Mission Board on Tuesday. This will be chaired by the Chancellor and drive the Government’s work to achieve the highest sustained growth in the G7. New measures have already been announced to fix the planning system, the creation of a new National Wealth Fund and the overhaul of the listings regime to boost UK stock exchanges.

The work announced today – focusing on investment – is the first phase in reviewing the pensions landscape and will be led by the first ever joint Treasury and Department for Work and Pensions Minister, Emma Reynolds (Minister for Pensions). The next phase of the review starting later this year will consider further steps to improve pension outcomes and increase investment in UK markets, including assessing retirement adequacy.

The Chancellor and the Pensions Minister will chair a roundtable with the pensions industry on Monday to start intensive industry engagement for the Review.

Chancellor of the Exchequer Rachel Reeves said: “Despite a very challenging inheritance, this new Government is getting on with the job of delivering our mandate to get the economy growing so we can make every part of our country better off.

“The review we are announcing is the latest in a big bang of reforms to unlock growth, boost investment and deliver savings for pensioners. There is no time to waste. That is why I am determined to fix the foundations of our economy so we can rebuild Britain and improve people’s lives.”

Deputy Prime Minister Angela Rayner said: “After putting in years of hard graft serving their communities, the very least our frontline workers deserve – millions of whom are low paid, millions of whom are women – is dignity and security in retirement.

“That’s why we want to make sure their hard-earned money works harder for them so we ensure they receive the pensions they have earned, whilst unlocking growth across our economy.”

Pensions Minister Emma Reynolds said: “As the first ever joint Treasury and DWP Minister I am uniquely placed to tackle the twin challenges of productive investment and retirement outcomes.

“Over the next few months the review will focus on identifying any further actions to drive investment that could be taken forward in the Pension Schemes Bill before then exploring long-term challenges to ensure our pensions system is fit for the future.

“There is so much untapped potential in our pensions markets, with an industry worth around £2 trillion. The measures we have already set out in our Pension Schemes Bill will help drive higher investment and a better deal for our future pensioners.”

M&G plc CEO Andrea Rossi said: “A Pensions Review is long overdue and to be welcomed. M&G has a rich heritage of investing in the UK and there are significant opportunities ahead to give the real economy a boost over the next decade and beyond.

“We know from experience, through our PruFund offer, that a large pooled fund gives savers access to a wider range of productive assets that aims to maximise benefits over the long-term. Consolidation, combined with the role of advice, has huge potential to align the interests of savers with the UK’s growth ambition. We look forward to supporting the Government on this landmark review.”

BVCA Chief Executive Michael Moore said: “We are very encouraged that the Government has brought forward their Pensions Review so quickly.

“The Chancellor has a real opportunity to deliver economic growth by facilitating increased investment in UK businesses to the benefit of returns to pension savers as well as the wider economy.

“Legislative and policy changes, including further consolidation of pension schemes to increase pension schemes’ ability to deploy capital into UK private capital funds are vital, as is greater industry partnership.

“The BVCA’s Investment Compact has already brought together over 100 growth equity and venture capital firms committed to working with pensions schemes to consider effective structures that attract investment.”

Defined contribution schemes will be managing around £800 billion in assets by the end of the decade and the Review will explore ways to increase their investment into productive assets. Even a 1 percentage point shift of assets into productive investments could mean £8 billion of new productive investment to grow the economy and build vital infrastructure by the end of the decade.

This would also help savers using these schemes build up better retirement pots as productive assets are more likely to provide higher returns. Immediate action has already been taken to boost retirement savings through the Pensions Bill, which introduces a Value for Money Framework to promote better governance and achieve higher returns – boosting the pension pot of an average earner who saves over their lifetime in a defined contribution scheme by over £11,000.

The first stage of the review will examine actions to support greater productive investment and better retirement outcomes, including through further consolidation and encouraging at-scale schemes to increase returns through broader investment strategies.

The Local Government Pension Scheme (LGPS) in England and Wales is the seventh largest pension fund in the world, managing £360 billion worth of assets. Its value comes from the hard work and dedication of 6.6 million people in our public sector, mostly low-paid women, working to deliver our vital local services. Pooling this money would enable the funds to invest in a wider range of UK assets and the government will consider legislating to mandate pooling if insufficient progress is made by March 2025.

To cut down on fragmentation and waste in the LGPS, which spends around £2 billion each year on fees and costs and is split across 87 funds – an increase in fees of 70% since 2017, the Review will also consider the benefits of further consolidation.

The first stage of the review will report in the next few months and consider further measures to support the Pensions Bill. It will take account of the need to prioritise gilt market stability, liquidity and diversity. It will then broaden out to consider the wider pensions landscape to strengthen security in retirement. In the meantime, immediate action has been taken through new laws announced to Parliament in The King’s Speech.

Barclays CEO C. S. Venkatakrishnan said: “We welcome the Government’s timely review of the pensions sector.

“Pensions reforms are critical to unlocking institutional investment in growth equity, and alongside a streamlining of listing requirements, will give a significant boost to UK capital markets and growth. Building institutional demand is also an important signal in encouraging private share ownership.

Border to Coast CEO Rachel Elwell said: ““Our focus is on delivering a strong and sustainable LGPS to enable it to pay the pensions of the 6.6million local government workers in an affordable manner.

“Border to Coast has developed innovative and cost-effective investments, while cutting Private Market fees by almost 30%. There is an opportunity to build and expand on this, delivering greater value to local taxpayers, and delivering productive investment in the UK. We therefore welcome the opportunity to work with the Government on a co-ordinated review to deliver this.

“If the Government is ambitious and considers a wide range of options in this review we are optimistic that this will deliver the clear roadmap we have called for, building on the work of the BVCA’s Pensions and Private Capital Expert Panel.”

Chair of the Pensions & Private Capital Expert Panel and co-founder of IQ Capital Kerry Baldwin said: “An early and ambitious review of the pensions landscape is an extremely important step in prioritising returns for UK savers and driving economic growth.

“The Chancellor’s Pensions Review will add further impetus to the work of the Investment Compact for Venture Capital and Growth Equity, which has brought together the private capital and pensions industries to support pension savers and to encourage investment from pension funds into unlisted equities.

“There has been significant progress through this collaboration. We are already developing a greater understanding of the ways we can work together to deliver new options for UK pension savers at the same time as supporting high growth, innovative UK companies with new sources of capital.

“The Review offers us the opportunity to develop this shared agenda further and deliver better outcomes for all the stakeholders.”

TheCityUK CEO Miles Celic said: “Creating the right investment environment is critical both for improving people’s retirement incomes and for boosting growth across the UK.

“The government’s new Pensions Review will be an important mechanism to help deliver this. We look forward to working closely with government and regulators to ensure that an effective long-term strategy that supports financial resilience is developed.”