The calm before the cuts? What to watch in Labour’s first spring statement

The Chancellor’s Spring Statement this Wednesday was initially framed as a ‘forecast’ – a technical and routine fiscal update. However, with growing pressure over the performance of the economy, it’s now shaping up to be a far more politically charged and consequential moment for the government.  

In this blog, we share what to expect from the Statement – including the emerging political tensions, the departments and priorities likely to be affected, and how this sets the tone ahead of June’s Comprehensive Spending Review (CSR).  

The context  

The Spring Statement will serve as a bellwether for Labour’s fiscal strategy and a prelude to the high-stakes CSR in June. Rachel Reeves is expected to set out the broad spending envelope that will guide departmental budgets – effectively signalling who wins and who loses in public spending over the coming years. 

Politically, this is being cast as Reeves’s toughest test yet, as she must reassure markets (and voters) of Labour’s economic credibility while addressing mounting pressure within her party over potential “austerity” measures. What began as a routine update has taken on outsized importance as a signal of Labour’s priorities going into the summer’s comprehensive budget reset. 

All signs point to Reeves doubling down on fiscal restraint. She has ruled out any major tax rises on Wednesday, meaning any effort to shore up the public finances will come largely from spending cuts. Indeed, reports indicate she will announce the biggest spending cuts since the austerity era, with overall Whitehall budgets set to be billions lower than previously planned. Early estimates suggest this could translate to reductions of roughly 7% over four years for “unprotected departments”. 

Crucially, Wednesday’s statement will reveal the average spending growth government-wide and the assumptions for protected areas – with detailed allocations for each department held back until the June review. In other words, the Chancellor will outline how much money is available, leaving ministers to haggle over the specifics in the coming months. 

Four things to watch out for 

1. Who gets hit – and what that means for the CSR 

By design, Labour has chosen to shield a few key priorities – notably defence and health – from deep cuts. In practice, that means many “unprotected” services face real strain. For example, the Department for Transport is reportedly preparing to scale back or delay projects – even ones the government only recently green-lit (East West Rail, a new Oxford–Cambridge line, is one such project now under review). Departments have been asked to model cuts as steep as 20% in some scenarios, underscoring how stark the trade-offs could become. 

Notably, even the Department for Education – a clear winner from the Autumn Budget – is understood to be modelling potential cuts. Reports suggest this could include means-testing free school meals for infant pupils and scaling back creative subjects in the curriculum – options that would carry significant political risk. We’re cautious about whether this is a genuine direction of travel or an attempt by DfE to use the media to signal the political cost of further cuts to the Treasury ahead of the CSR. 

We’ll be watching whether Reeves’s speech confirms this harsh outlook for “non-priority” departments – and how explicitly those tensions are acknowledged. Either way, the scale and shape of the Statement will be a strong indicator of how aggressive June’s CSR will be in reallocating limited resources. 

2. The politics behind the pain 

The political calculations behind these choices are increasingly apparent. Labour is keen to avoid any suggestion it will tax or borrow profligately, so sticking to tight fiscal rules has been the order of the day. Reeves has pointedly kept pledges like the state pension triple lock and vowed not to raise headline taxes this spring – moves aimed at bolstering voter trust, but which severely limit her options. Even some usually sympathetic observers worry the government has “hemmed itself in” with these commitments. 

3. Will Labour hold together? 

The political tensions are already visible. Reports suggest Reeves’s recent Cabinet discussion was the “most tense” so far, with senior ministers – including Angela Rayner, Ed Miliband, Yvette Cooper, and Shabana Mahmood – raising concerns about the impact of cuts on their briefs.  

Beyond the Cabinet, Labour MPs across the party – including those in newly-won marginal seats – are worried. Some fear a return to austerity; others worry the government risks looking indistinguishable from its predecessors. As one Labour MP bluntly put it: “What are we doing that the Tories wouldn’t be?” If Wednesday’s Statement doesn’t offer clarity – or cover – expect tensions to rise. 

4. How this shapes the story 

Reeves is walking a tightrope. She wants to be seen as serious, stable, and economically credible. But she also has to show that Labour is doing things differently and delivering for those who voted for change. If she lands it, the Statement could strengthen Labour’s economic credentials amid a period of relative success for the government.  

But if the Statement is seen as austerity by another name, it risks undermining the party’s promise of change. The real test will come in June when budgets are set in full, but the narrative begins now – and may be hard to shift once it takes hold. 

What next?  

With departments preparing to defend their budgets, and tough trade-offs ahead, evidence of contribution to growth, resilience and essential services will be more important than ever.  

Join our post-Statement webinar on Thursday at 9am to discuss the implications for the wider operating environment. RSVP to events.rsvp@wacomms.co.uk.