The Spring Statement today contained no surprises for employers as they prepare to increase the minimum wage and national Insurance next week.
In this statement, the Chancellor Rachel Reeves has already stated that she will not be increasing taxes on employees, but instead, employers’ national security contributions from 13.8% up to 15% in April, as announced by October budget.
She claimed that the government was forced to make bold decisions because of the legacy left by the previous administration. This meant “an active government that does not step back but steps up”, as well as the fact that Labour is “on the side” of workers.
The Office for Budget Responsibility halved their 2025 growth forecast for the UK, to 1%. However, they upgraded their longer-term estimates starting in 2026.
The official fiscal outlook also predicts that the inflation rate will rise to 3.2% by 2025 (it’s currently at 2.8%), and then “rapidly fall” to 2.1% by 2026.
Today’s announcement included an increase in funding for HM Revenue & Customs in order to combat tax evasion.
Reeves stated in the October budget that Treasury would crack down on schemes like umbrella companies which “exploit” workers by recruiting more HMRC staff.
Today, she announced that HMRC would be able to combat tax avoidance by investing in technology and other resources. This will raise an additional PS1 billion to the public purse.
Treasury announced that there will be a Consultation to determine how best to “close down on those who promote marketed tax avoidance and whose contrived plans leave their clients with unanticipated tax bills”. The Treasury said there would be a consultation on measures to “close in” on promoters of marketed tax avoidance, whose contrived schemes leave their clients with unexpected tax bills.
Reeves confirmed details about welfare that are designed to save PS5 Billion a year, by 2030. This includes stricter tests for payments of personal independence and a freezing of incapacity benefit.
She announced “final adjustments” in the benefits changes and shared that the Office for Budget Responsibility confirmed that the reform will save PS4.8 billion from the welfare budget.
She said, “If you are able to work, then you should.” “But if you cannot work, then you need to be supported properly.”
Reeves also revealed plans to cut government operating costs by 15% before the end of this decade. This is expected to result in the loss of around 10,000 jobs.
She said that the recent dissolution of NHS England and this move were all part of an effort to “make our State leaner, more agile, and deliver more resources to frontline”.
Reeves announced plans to increase public spending on defence and infrastructure. The government will invest PS13 billion in capital infrastructure in the next five-year period. A construction skills package is being launched to train up 60,000 additional skilled workers.
‘Rethink plans’
Shadow chancellor Mel Stride, however, described the Spring Statement of 2012 as an “emergency Budget”, accusing Reeves to “tanking” the economy and creating the “highest taxes burden… in the history… of the country”.
TUC General Secretary Paul Nowak called on the government to reconsider its plans for welfare reform and reductions in the civil service.
He said, “Ministers must rethink their plans.” He said: “Ministers need to rethink their plans.”
Public sector workers are the key to national renewal. After 14 years of Tory ruin and chaos, many people feel demoralised and burned out.
It’s important that the government invests and recognizes the role these workers play in improving services on which we all depend.
Any approach to transform our public services should include clear workforce plans in every area of the public sector. These must be developed with unions and staff.
Ronni Zehavi said that the CEO and cofounder of HiBob HR software, Ronni Zehavi stated that “every British company” was watching the announcements with the hope to see a reduction in employer NI contributions.
He said that employers were forced to make difficult budget decisions as they had less than two weeks before the implementation date. Many are reducing staffing, freezing wages, or changing them, and reducing their investment in employees.
The cost of hiring people is the biggest burden for businesses. The government must not overlook the need to provide assistance to employers, especially with new employment obligations to be implemented in April. The lack of support today is a blow to businesses, but they must not forget the importance of investing in talent over the long term.
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