The Chancellor of the Exchequer, Rachel Reeves, has pledged there will only be one full Budget a year to give families and businesses increased certainty. So, in theory, the Spring Forecast statement on March 26th should be a more pedestrian affair.
However, a lot has happened since the Chancellor’s first statement in Autumn 2024 with Donald Trump’s trade tariffs and conflicts in the Ukraine and Middle East disrupting global stability. The Office for Budget Responsibility (OBR) will publish its outlook for the UK economy on the same day of the Forecast and the Government has already signalled cuts to spending, including to the welfare budget and the scrapping of NHS England.
In this article, our experts consider some of the key questions and considerations.
Will the Chancellor have to raise taxes?
Ruth Harris, Investment Research Analyst, says: “Rachel Reeves is in a challenging situation. In October, she pledged to maintain fiscal discipline while committing to just one fiscal event per year. However, the budget left very little headroom.
“In recent months, the UK has seen downgraded growth forecasts, higher gilt yields, and increased demand for defence spending. Whether the Chancellor remains within her “ironclad” fiscal rules is contingent on the OBR forecasts, which are highly subjective in an increasingly uncertain world. If the forecasts are downgraded, she will have to choose between breaching the fiscal rules or implementing unscheduled tax hikes or spending cuts.”
Are changes to ISAs on the cards?
Alastair Power, Investment Research Manager says: “Potential amendments to cash ISA allowances have been rumoured in recent weeks but no changes are expected at the upcoming Spring Forecast.
The redirection of cash savings to the stock market would be expected to aid in improved long-term returns for investors and provide supportive buying to the UK’s stock market. Younger working-age savers are the cohort who could be the greatest beneficiaries given longer time horizons and ability to take risk.
“Widespread activity, however, feels unlikely, especially so for retirees and those close to retirement.”
What can be done to boost the economy?
James Igoe, head of Redmayne Bentley's Manchester office, suggested there are likely to be some efficiency savings, with government departments being instructed to identify cutbacks as part of a spending review.
Infrastructure projects that had been allocated funding may even be cancelled to support these cutbacks, he said.
“Better connectivity can be achieved through infrastructure projects, which appear to be in planning, such as Heathrow Airport’s third runway and the Oxford-Cambridge Arc.”
“International relations will also be a driver of economic outcomes for the UK. Having strong relationships with the European and US economies which allow for import/export trade to support UK businesses is another driver of productivity and something that the Chancellor will be keen to support.”
Please note that tax treatment depends on the specific circumstances of each individual and may be subject to change in the future.
The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.
This communication is for information only and does not constitute a recommendation or financial advice.