Chancellor’s statement lacks spring

Chancellor of the Exchequer Rachel Reeves gave her Spring Statement yesterday (26 March), announcing a raft of spending cuts but little of special note to rural interests amid a gloomy economic outlook. 

The statement exclusively concerned spending and there are no new tax rises for the time being. The rural sector has expressed some relief that the assault on family farms announced at the Budget has been taken no further but conversely, neither has the new inheritance tax been alleviated. Tax backets remain frozen despite inflation, so the overall tax burden is expected to reach the record level of 37.7% of GDP by 2027-28, an increase from 35.3% this year. 

There was a notable shift from day-to-day spending to longer-term investment. What this will mean for rural communities, for example in the provision of services, is difficult to predict because the Chancellor is not responsible for the details of how departments spend their money. Defra’s capital budget has been confirmed as rising by £400 million in the new financial year but worryingly, its resource budget – from which we can expect most agricultural support to be derived – is seeing a £200 million cut. This reduction could severely undermine the government's ability to support farmers, protect rural communities and deliver on its environmental commitments. 

Government administration costs also came into the Chancellor’s crosshairs with a £150 million fund for civil service exit payments contributing to a projected 15% saving by the end of the decade. Last week’s news that spending on government credit cards quadrupled since 2020, some of which the government has accepted was unjustified, suggests this may be optimistic. Defra officials managed to spend £1,700 on training in public speaking, £900 at Zizzi and £3,225 on a hotel in the Turks and Caicos Islands. The Sustainable Farming Incentive scheme remains closed. 

Media commentary has focused on changes to the health element of Universal Credit, available to people with disabilities. For new claimants, this rate will be nearly halved to £50 per week from next year and then frozen at that level until 2029-30, although an additional premium has been promised to people with long-term health conditions. All told, welfare cuts are projected to save £4.8 billion. 

The Chancellor painted a broad economic picture of inflation remaining relatively low at 3.3% and in future years set to fall, but growth has been forecast by the Office for Budget Responsibility to halve from the 2% projected at the Autumn Budget to only 1% this year, not reaching 2% for the remainder of the government’s term of office.  

For a government that has placed growth at the heart of its agenda, these figures, if realised, would be disastrous. Clearly the Chancellor hopes to beat them, giving herself a success to announce at some other statement in future.