Chancellor Rachel Reeves has tightened the welfare budget while ramping up defence spending in her Spring Statement, aiming to revive a sluggish economy.

The Office for Budget Responsibility (OBR), the government’s independent financial overseer, has halved its UK growth projection for 2025, now forecasting just 1% expansion. Reeves attributed the downturn to global instability, describing the world as "changing before our eyes" and vowing to usher in a "new era of security and national renewal."

Despite the short-term hit, the OBR offered a more optimistic outlook for the coming years, crediting increased housebuilding as a key driver of stronger-than-expected growth.

According to an assessment by the Department for Work and Pensions, 3.8 million families are set to gain an average of £420 per year due to policy changes. However, separate government analysis suggests over 3 million families will see their annual income drop by £1,720 by 2030 due to benefit reductions.

Initially intended as a routine fiscal update, the Spring Statement has turned into a far-reaching financial reset, as weaker growth and higher borrowing costs forced Reeves to take more drastic action.

The opposition Conservatives branded the announcement an "emergency budget," accusing Reeves of trying to fix economic problems caused by her own decision to hike national insurance for businesses and increase government borrowing. The government strongly rejects this, insisting it remains committed to strict "fiscal rules" designed to prevent a repeat of the economic turmoil following Liz Truss's ill-fated "mini-budget."

However, the OBR cautioned that Reeves will only stay within her fiscal constraints by implementing significant public spending reductions. While the government maintains that the most vulnerable will be shielded from these cuts, some Labour MPs have criticized the move, arguing it unfairly targets those in need.

Labour MP Jon Trickett voiced his opposition on social media, stating: "I will not be voting for cuts to the poorest people on welfare benefits. The chancellor has other options. Picking on disabled people is not the right thing to do."

Alongside welfare reductions, Reeves unveiled an additional £2.2bn for defence and introduced a target to slash government administrative costs by 15% by 2030.

Welfare changes include a smaller-than-expected increase in the standard rate of universal credit—£1 per week lower than previously planned. Additionally, the health component of universal credit, which provides extra support for those with limited work capability, will remain frozen at £97 per week until 2029 for current claimants.

The government’s own impact assessment estimates that an additional 250,000 people, including 50,000 children, will be pushed into relative poverty due to these changes.

By 2030, around 800,000 people will lose access to Personal Independence Payments (PIPs). This includes 370,000 current claimants who will see their benefits reduced after reassessment under new criteria, and 430,000 potential future recipients who will no longer qualify.

Meanwhile, 2.25 million individuals currently receiving the health top-up to universal credit will lose an average of £500 annually due to the freeze, while 730,000 future claimants will miss out entirely.

On the other hand, 3.9 million households not receiving the health element of universal credit are expected to benefit, gaining an average of £265 per year from an increase in the standard allowance.

The government insists its estimates are limited, as they do not factor in additional funding designed to help people with disabilities find employment, nor new protections for those with severe lifelong conditions.