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Rachel Reeves's Spring Statement 2026 confirms various tax rises as well as changes to public spending.
03 March 2026
Rachel Reeves delivered her Spring Statement just three months after her tax-raising Autumn Budget 2025. This was a more low-key affair than the Budget with a focus on reviewing forecasts previously made. It could be said that this was a missed opportunity to add clarity to economic plans.
And although the Chancellor says her focus is on economic growth, both the Bank of England (BoE) and the Office for Budget Responsibility (OBR) continue to have a gloomy view of the issue in the absence of a clear plan. In fact, the OBR has downgraded its growth expectations for this year.
The ongoing issues in the Middle East add an extra dimension to the economic challenges, particularly on energy costs - impacting inflation.
On the last point, the Chancellor announced extra spending for defence (although it was known that the Treasury was unhappy with the extra spending). It was also not clear how the planned increase in defence spending to 3% of GDP by the end of this parliament is to be achieved.
The Chancellor says she has more fiscal headroom than in the Autumn Budget, but that is due to January 2026 tax receipts which will soon be eaten up. With extra spending on welfare, defence and education, the Chancellor will be hoping for more growth in the economy to fund these increases.
Growth is for a purpose, said the Chancellor, and announced growth would improve, but it was unclear how. She announced updated growth forecasts from the OBR: 1.1% in 2026 (downgraded from previous forecast), 1.6% in both 2027 and 2028, and 1.5% in both 2029 and 2030.
Unemployment is expected to rise further this year to 5.3% (although even higher for younger people). At the Autumn Budget the OBR forecast unemployment to rise to 4.9%.
The OBR's forecasts will need to change to reflect the impact of the rise in energy prices triggered by the conflict in the Middle East.
There was no announced relief for business rates or student loans. Both issues had been expected to be raised in the statement.
Last year's rises in National Insurance as well as ongoing rises in the National Living Wage, and the new Employment Rights Act have collectively dampened recruitment and investment. Plus, the ongoing effect of frozen tax allowances and the imminent changes to inheritance tax all create a landscape of significant challenges for businesses and individuals.
The OBR also expects living standards to stagnate as "taxes drag on disposable incomes". This is the ongoing impact of fiscal drag.
Whilst no new tax rises were announced, there is speculation that if spending is not controlled then more tax rises may be needed by the next Autumn Budget, making this Spring Statement a holding exercise.
The two-child benefit cap will be removed from April 2026, and welfare benefits will rise in line with inflation.
Brief recap – key changes previously announced:
If you would like to discuss how these changes may affect you and/or your business, please contact your usual Bishop Fleming advisor, or speak to a member of our tax team.
[Gary Mackley-Smith]
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