Chancellor delivers the Spring Statement - Mar 3

Chancellor of the Exchequer (Rachel Reeves): Mr Speaker this government has the right economic plan for our country… …a plan that is even more important in a world that in the last few days has become yet more uncertain. It is incumbent on me and on this government to chart a course through that uncertainty… …to secure our economy against shocks… …and protect families from the turbulence that we see beyond our borders.

I want to express my gratitude to members of the Armed Forces as they serve across the globe to protect our country… …and I want to reassure this House that I am in contact with my international counterparts, with the Governor of the Bank of England, and with key affected industries… …including our maritime sector. And tomorrow, I will meet with our North Sea industry leaders to discuss the implications they face… …and work with them to manage this uncertain period.

Mr Speaker, in an increasingly dangerous world, I am proud to be the Chancellor that is delivering the biggest sustained increase in defence spending since the Cold War: With £650m committed in January to upgrade fighter jets, a Royal Navy frigate launched from Rosyth last week… …and just yesterday, our £1bn helicopter deal with Leonardo.

I am in no doubt about Britain's ability to navigate the challenges we face. The plan that I have been driving forward since the election is the right one: Stability in our public finances, Investment in our infrastructure… …and reform to Britain's economy.

It is a plan to reshape our economy and break with the failed ideas of the past… …building growth not on the contribution of a few people or a few parts of the country, but in every part of Britain… …with a state that doesn't stand back, but steps up… …strengthening our trading relationships and our alliances… …creating capacity in the economy through affordable housing, good transport and free childcare… …an active and strategic state, building growth and economic security in an uncertain world.

Stability is the single most important precondition for economic growth… …that is why we have committed to a single major fiscal event each year… …limiting major policy changes to the Budget and giving businesses and households the certainty they need. Today, the new forecasts from the Office for Budget Responsibility confirm that our plan is the right one: Inflation is down, Borrowing is down, Living standards are up… …and the economy is growing.

Mr Speaker, this government has restored economic stability. The previous government let inflation skyrocket to over 11%, Stoked interest rates to 15-year highs… …and delivered the first Parliament on record where people were poorer at the end than they were at the start.

I recognise the impact that had on families. We promised change at the election, and I understand the responsibility on me to deliver that change. I know that the question people will ask themselves at the next general election is this: Are me and my family better off? I am determined that the answer will be yes.

The change we promised has already started: There have been six cuts in interest rates since the election… …the fastest pace in 17 years… …and inflation has fallen. For businesses, that means lower capital costs and greater certainty… …and for families, it means more money in their pockets to spend in local shops and on our high streets.

Those interest rate cuts will save households over £1,300 a year on a typical new fixed-rate mortgage… …And real wages have now risen more in the first eighteen months of this government than they did in the first ten years of the previous government.

At the Budget, I went further to deliver the change that people rightly demand: I froze prescription charges for the second year in a row, I froze fuel duty for a further six months, I froze rail fares for the first time in 30 years… …and I cut energy bills by £150 from next month. In February, the Bank of England confirmed that inflation will fall faster because of the action that I took at the Budget. And today, the Office for Budget Responsibility expect inflation to come down even faster than it forecast in the Autumn.

Mr Speaker, in the current global context, the action that I have taken is all the more crucial. Keeping inflation as low and stable as possible is the best way to support family incomes and reduce pressure on the cost of living. But that's not all that we've done: This Labour government has funded 30 hours of free childcare for working families, We are rolling out free breakfast clubs at primary schools… …and we are set to achieve the biggest reduction in child poverty over a Parliament since records began by reversing the shameful two-child limit imposed by the party opposite.

That is the moral choice… …for the children who will no longer go to school hungry… …and for the women who will no longer suffer the grotesque indignity of the rape clause. And it is an enduring investment in our children and in our future… ...to realise the potential of young people that would otherwise be wasted.

The Tories have said they would reinstate that destructive policy... …And now Reform are saying exactly the same thing: Two parties united in their intention to plunge nearly half a million children back into poverty in a single stroke. Mr Speaker, if you import failed Tory politicians you get failed Tory policies too. Labour and only Labour has the right economic plan for families and for our country.

Last year, we demonstrated the resilience of Britain's economy in the face of global headwinds… …with the fastest growth of any G7 country in Europe. Today, the Office for Budget Responsibility has updated its growth forecasts, including reflecting lower net migration: Average growth across the forecast period is largely unchanged… …while the OBR has adjusted the profile of GDP so that it grows slightly slower in 2026, and faster in 2027 and 2028. GDP is forecast to grow by 1.1% in 2026, 1.6% in both 2027 and 2028, and 1.5% in both 2029 and 2030. And GDP per capita is set to grow more than was expected in the Autumn… …with growth of 5.6% over the Parliament… …after falling under the Tories in the last Parliament… …and by the next election, after accounting for inflation, people are forecast to be over £1,000 a year better off.

We promised change and Mr Speaker, and we are delivering change. The economy is growing… …Living standards are rising… …and inflation has fallen… …But I am not yet satisfied with these forecasts. I know that the economy is not yet working for everyone… …And that the deep economic scars left by the party opposite are still blighting the lives of too many people.

In today's forecasts, unemployment is set to peak later this year and then fall in every year of the forecast period… …ending the Parliament at 4.1% - lower than it was at the start. But young people in particular are still suffering from the aftermath of years of Tory mismanagement: In the last five years of the previous government, the number of young people not in education, work or training rose by 113,000, The number of inactive young people reached record levels… …and over the last decade apprenticeship starts by young people fell by 40%.

This government will not leave an entire generation behind. We are already taking action with additional investment to reform apprenticeships to prioritise young people… …and through £820m for our Youth Guarantee, providing young people with employment support and a guaranteed job, ….and in the coming weeks I will set out more reforms to undo the Tory legacy of neglect… …and give young people the support and opportunity they deserve.

Mr Speaker, in the face of global uncertainty, we beat the forecasts last year… …and we are taking the necessary action to beat them again. In the year ahead, more of the choices we have already made will take effect: Discounts on business energy costs, Trade deals with India, the US and Europe, Reforms to back entrepreneurs, Investment in our infrastructure, Skills funding for further education… …and more planning reforms. Progress opposed by the Conservatives, opposed by Reform, opposed by the Liberal Democrats, and opposed by the Green Party… …because it is Labour and only Labour that has the right economic plan for our country.

Our plan for growth is grounded in a profound rejection of the failed economic dogmas of the past… …the trickle-down, trickle-out thinking that produced ever-diminishing returns for working people – I know that an economy cannot be working, if it is delivering only for a few people, in a few places, I know that it matters where things are made and who makes them… …and I believe that the working people who keep our country moving deserve a fair day's pay for an honest day's work.

Since the election, I have been making the big choices that will bring about the deep, structural change that our economy needs so that it works again for working people: The choice to take on vested interests by backing the builders, not the blockers, The choice to increase public investment and protect our public finances with new fiscal rules… and the choice to give people in all parts of our country the opportunity they deserve… …by reforming the Treasury Spending Rules in the Green Book to unlock investment in all our urban, rural and coastal communities.

Mr Speaker those are the right choices for our country… …for stability, for security and for growth. Today's forecasts from the Office for Budget Responsibility show that they are starting to pay off… …and I am clear-eyed about where the opportunities for the British economy lie in this Parliament and beyond.

In my second Mais lecture in two weeks, I will set out three major choices that will determine the course of our economy into the future: To go further in strengthening our global relationships… … breaking down trade barriers and deepening alliances with our European partners for a more secure, connected economy. To go further in backing innovation and harnessing the power of AI… …so entrepreneurs and innovators thrive here in Britain and working people reap the rewards… …And to go further in transforming our economic geography… …so that we can build growth on a broad and stable basis… …spreading opportunity and unlocking the contribution of every part of Britain.

Mr Speaker, I came into politics because I believe in a government that stands up for working people… …that everyone – no matter where they grow up – deserves security and their fair chance to achieve their potential… …and that being able to manage the bills, afford a home and pay for a holiday is never too much to ask. When governments lose control of the economy – as the Tories did - it is working people who pay the price… …in their pay packets, in their bills and in their mortgages.

That's what the party opposite inflicted on working people over fourteen years: Austerity – which cut off investment, Brexit – which cut us off from our closest trading partner, And Liz Truss's disastrous mini-Budget… …cheered on by the Leader of the Opposition and cheered on by the HM for Clacton.

Mr Speaker, Five Prime Ministers, seven Chancellors, eleven plans for growth… …and at the end of it all: The only Parliament on record where people were worse off at the end than they were at the start… …and a £22bn black hole in the public finances. That is their legacy.

And make no mistake – the Tory Tribute Act over there would do exactly the same thing, They may have changed the colour of their rosettes, But the British people won't forget that they are the same people who wrecked our public services and wrecked our public finances in the Tory government: The same people, The same policies, The same disastrous outcomes for working people.

The Tories left our country, our people and our allies exposed: They had no plan and no intention to fund their pledge to spend 2.5% of GDP on defence… …and Reform would go one step further by ditching our allies and siding with Russia... ... while the Green Party wants to take us out of NATO and jeopardise our alliances. So let me be clear: It is Labour and only Labour that can provide social justice, national security and fiscal responsibility.

In their forecasts today, the Office for Budget Responsibility show that we are set to reduce borrowing by nearly £18bn compared to the Autumn. This year we are set to borrow less than the G7 average – something the Tories never achieved in fourteen years. The forecast today shows that Public Sector Net Borrowing is set to fall from 4.3% this year, to 3.6% next year, then 2.9%, 2.5%, and 1.8% in 2029-30.

And even after funding other measures announced since the Budget… …including the new Special Educational Needs system set out by my RHF the Education Secretary last week… …headroom against the stability rule in 2029-30 has increased from £21.7bn to £23.6bn… …With headroom against the investment rule also higher at £27.1bn… …And debt is set to be lower in every year of the forecast compared to the Autumn.

Mr Speaker, it is because of the choices I have made to keep our public finances stable and restore our credibility that we can invest in the priorities of working people: Investment in our communities – to build Pride in Place, Investment in our schools – to fix crumbling classrooms and give every child the education they deserve… …and investment in our NHS – to bring waiting lists down with a record cash settlement.

I have never accepted that we have to choose between social justice and fiscal responsibility… …because there is nothing progressive, nothing Labour, about spending over £100bn a year – that's one in every £10 of public money… …on servicing debt racked up by the Tories.

After their disastrous mini-Budget, our debt interest rates soared towards the highest in the G7… And since my Budget, while average yields have risen for the rest of the G7... ... yields on UK government debt have fallen. The Tories squandered Britain's credibility... ...and my plan is rebuilding it.

Already, we are expected to spend £3bn a year less on debt interest by the end of the Parliament than was forecast in the Autumn… …and if we stay the course and stick to our plan… …and our debt interest rates return to the G7 average… …we will have £15bn a year more for the priorities of working people and to make working people better off: That is the prize on offer, That is the prize within our grasp.

This is the right plan: A stronger and more secure economy, Inflation and interest rates falling, Resilient public finances… …and in every part of Britain – working people better off.

Mr Speaker, every additional patient treated in an NHS hospital, Every child lifted out of poverty, Every breakfast club in every school is because of the choices we have taken… …and because I have the right economic plan for our country.

But let this House be in no doubt: Every pound that we have invested, Every pound in the pockets of working people, Every pound that we have secured in the forecast today, can be wiped out by a change of course.

So, we must reject a return to austerity – to protect our public services and invest in Britain's future… …we must reject the temptation of easy answers and reckless borrowing – to protect family finances and get the cost of living down... …and, we must reject the political instability which would put at risk all the progress we have made.

My plan is the right one. I am in no doubt about how great the rewards can be if we stay the course. The forecasts today confirm that the choices this government has made are the right ones: Stability in our public finances, Interest rates and inflation falling Living standards rising, More children lifted out of poverty, More appointments in our NHS, More investment in our infrastructure, A growing economy …and more money in the pockets of working people. Mr Speaker, these are the right choices, this is the right plan, and I commend this statement to the House.