Rachel Reeves Archives - WA Communications

Spring Statement 2025 – tough choices and tighter margins

The Chancellor’s Spring Statement, delivered under mounting fiscal pressure and growing political tension, marked a particularly delicate balancing act for Rachel Reeves. Being framed as tough but necessary, the Chancellor’s decision to push through sweeping welfare reforms and deepen spending cuts reflects both the gravity of the economic situation and a clear pivot for the Labour Government.

Economic backdrop

Reeves’ statement follows several weeks of pre-briefing and speculation over anticipated heavy cuts to public spending in response to limited fiscal headroom, and this has been compounded by this morning’s decision by the OBR to downgrade the UK’s economic forecast for 2025, reducing it from 2% to 1%, with no expectation of a return to 2% growth during this Parliament. This downgrade brutally illustrates the Chancellor’s challenge: stagnant growth, spiralling debt interest payments, and worsening global conditions have all but erased any fiscal wriggle room.

In this context, Reeves’ emphasis on restraint was unsurprising. She reaffirmed the Government’s commitment to achieving a surplus within two years, rising to nearly £20bn by 2030. She also leaned heavily on OBR analysis that planning reforms will deliver a 0.4% uplift to GDP within the decade – the “biggest positive growth impact” the OBR has ever forecast for a cost-free policy. However, even with this optimistic framing, the broader economic picture remains challenging.

Winners and Losers

Three pillars defined the Chancellor’s approach: accelerating defence spending, reforming public services, and driving economic growth. Reeves framed the Statement as a response to a world in flux and name-checked geopolitical instability, namely Ukraine, the uncertainty of American foreign and economic policy under Trump, and growing NATO obligations.

But the most politically sensitive decision came in the form of welfare reform. Reeves confirmed £4.8bn in cuts, including a halving of the Universal Credit health element for new claimants and tightened eligibility for disability and incapacity benefits. These measures were immediately and fiercely contested.

While the Government insists these cuts are necessary to restore sustainability, outside Westminster the consequences are already being felt. As Reeves delivered her speech, disability rights campaigners staged protests outside Parliament, branding the cuts “cruel” and warning of devastating real-world impacts. The optics were stark: a Labour Chancellor defending welfare reductions while allocating billions more to defence.

Political implications

Politically, this is one of Reeves’ first true stress tests – and the consequences will echo beyond the fiscal arithmetic. Labour’s traditional social justice instincts now sit uneasily beside a more Blairite economic realism, and this tension was laid bare in the Chamber and across the country. The challenge is whether Labour can satisfy both its internal factions, balancing the expectations of its traditional base with the priorities of its more centrist wing, while maintaining the trust of voters who will decide its future at the next election.

The Treasury may claim these changes are modest in budgetary terms, but politically, they cut deep. Backbench discomfort is already simmering, and murmurs of rebellion could flare into something more disruptive if left unaddressed. With further spending decisions to come in the Autumn Budget, Reeves has little margin for error and even less political slack.

To find out more about what today’s announcements mean for your sector, get in touch at contact@wacomms.co.uk.

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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.

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Further, faster, higher – planes and politics

Sir Philip Rutnam was Permanent Secretary at the Department for Transport and the Home Office.

Will this be the time it actually happens? After so many attempts to build another runway at Heathrow, Rachel Reeves definitely thinks so. She wants ‘spades in the ground’ during this Parliament. But is the fate of this attempt now tied to the fate of Rachel Reeves herself?

I spent five years helping the Cameron and May governments extract themselves from a crude commitment against expansion, and instead have a new policy that allowed growth subject to conditions. We made real progress – until Heathrow got struck by the double whammy of Boris Johnson’s government and the pandemic.

The thing that strikes me now is the mountain that Heathrow and the government have to climb to get this project to happen, and the scale of the political effort that will be needed to drive it through. Rachel Reeves is not realistically going to be able to lead that, certainly not month in month out – it’ll have to come from the Transport Secretary – but it’s Rachel’s reputation that is now linked to the project more than anyone’s.

Let’s look at three big things that have to happen before Heathrow expansion gets anywhere near final permission to take off.

First, Heathrow itself has to get to the starting gate and put in the application. Rachel Reeves has said she wants proposals from them by the summer. But Heathrow has run this race before. It knows how much it costs to get prepared, and how much leverage it has now before it has put in the application. Expect difficult negotiations between Government and Heathrow over things like surface access (costing billions), economic regulation (ie higher landing charges), and what happens if the Government later changes its mind (would you fancy writing off more abortive costs?). And expect all those negotiations to be overseen directly by Heathrow’s shareholders, and watched keenly by its airline customers and airport competitors. There are real risks of challenge to DfT if anyone is left unhappy.

Second, the case for expansion itself has to be updated and future-proofed. Aviation has changed a lot since the key decisions made in 2018 – think of the balance between business and leisure travel, what’s happening in aviation technology, but also the smart, lower cost schemes for expansion at Gatwick and Luton. All this has got to be taken into account. So too has the latest evidence and policies on carbon and climate change, and other environmental impacts like noise. It’s a massive task to do this work right, and make the best possible case for expansion – and remember it’s Heathrow’s case that gets examined directly at a planning inquiry, not something general from the Government about what it wants to happen.

Finally, there’s the politics. There’s a long list of places, people and organisations that are dead against Heathrow expansion, and have a record of mobilising very effectively. Everyone from Sadiq Khan to lots of West London MPs and Councils to environmental organisations, cutting across party boundaries. Add in airspace modernisation (obscure but fundamental) and the list of places who will feel some effect gets much longer. The politics will only get more complex if the news on climate and carbon gets worse, or (paradoxically) if the news on growth gets a lot better.

None of this is to say that expansion can’t be made to happen: it absolutely can. Howard Davies showed ten years ago how strong the case is. But it will need really good political leadership to navigate through all this and come out the other side.

Over to you Heidi Alexander.

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Engaging with the 2025 Spending Review

Engaging with the 2025 Spending Review

Over the next six months, the Spending Review will determine the government’s spending priorities for the rest of this Parliament.

In our recent webinar hosted by WA’s Founding Partner Marc Woolfson, WA’s Senior Advisers – Jennifer Gerber, who worked on Labour’s 2007 Comprehensive Spending Review as Special Adviser to the Chief Secretary to the Treasury; and Sir Philip Rutnam, former Permanent Secretary and senior Treasury Civil Servant – explored how Ministers and Departments will attempt to balance these competing political and economic demands, the likely spending priorities, and how businesses can shape these discussions.

Priorities:

The Chancellor faces a difficult balancing act: reassuring the markets on stability, rebuilding trust with business, and reiterating the promise of Change to the electorate.

While the Missions, Milestones and Next Steps set out by the Prime Minister earlier this year establish the government’s priorities, and will form the political framework for evaluating spending decisions, the Chancellor’s financial options are increasingly narrow – with the £10bn of fiscal headroom identified in October’s budget evaporating as a result of low growth, sticky inflation, and a rise in the cost of government borrowing.

In particular, the overall budget envelope for the spending review will be significantly shaped on 26th March, when the Office for Budget Responsibility updates its economic forecasts.

To meet her ‘iron clad’ fiscal rules, Rachel Reeves is likely to have to take further action to cut spending – which however unpalatable, will be preferable to raising taxes or increasing borrowing.

This year’s Review is ‘zero based’, the first since 2007, meaning that every area of spending will be scrutinised. The Chief Secretary to the Treasury has mandated that funding for new priorities will only be considered if departments have already identified savings of 5%+ from their existing budgets.

Timings:

Across Whitehall, over the next 8-10 weeks departments will be modelling the effect of different financial scenarios.

Later in the Spring, during April and May, the Treasury will combine departmental plans, and assess their feasibility and impact, while the Chancellor and Chief Secretary to the Treasury engage in political negotiations with Cabinet colleagues – for publication of the Review in mid-June.

The length of the process runs the risk that other events may intervene, notably Trump’s threat of global tariffs, requiring further reassessment of the government’s economic or political priorities.

Equally however, there is a real risk of policy paralysis, with action paused for months while spending decisions are finalised (an issue exacerbated by both Keir Starmer and Rachel Reeves’ process-centric style of government) – in turn feeding accusations of a lack of political narrative, which may reach a crescendo around the local elections in May.

This period is likely to see an increase in Whitehall activity that doesn’t require immediate spending, with an array of strategies, priorities, reviews and pilots (for example the recently announced AI Opportunities Action Plan). In addition to seeking future spending commitments, businesses can use this time to raise their political profile today, by demonstrating how they are already supporting these government objectives.

Decision-Makers

This Spending Review is more centralised than most – with Rachel Reeves and Darren Jones holding a significant amount of decision-making power, and a structure of 1:1 discussions between the Treasury and individual spending departments. This contrasts notably with the Coalition Government’s ‘Star Chamber’ of cabinet colleagues,

Instead, independent assessment of spending priorities will be undertaken – within departments – by ‘Challenge Panels’ including former senior leaders from Lloyd’s Banking Group, Barclays Bank and the Co-operative Group, as well as other local delivery partners, think tanks, academics and private sector experts.

Their broad remit of these panels, to consider “what government spending is or isn’t necessary”, has the potential to provide strategic cut-through, and bring valuable business and front-line public service expertise to the heart of the spending review process. However, their value will depend on the time panel members can commit, and the options presented to them by departments – the result may be that panels assess only a top-line overview of department plans, and are largely a presentational device to demonstrate business and stakeholder input.

In either case, the absence of a Ministerial ‘Star Chamber’ may reduce the degree of long-term, cross-government political support for what will be difficult decisions.

It remains true that improved public services and significant cost savings can often be delivered by government departments working together to innovate and achieve shared priorities – however in this situation, these innovative structures are more likely to be achieved through individual collaborations between government departments, and likely to be formed on the strength of Ministerial relationships (for example seen in Wes Streeting and Peter Kyle’s shared promotion of the power of AI for the health service).

In this context, four audiences are key for businesses seeking to make a case for spending priorities:

Spending Departments: Businesses can help by providing data, analysis and ideas. Beyond the small teams working specifically on the Spending Review, it is sensible to engage with the civil servants responsible for individual policy areas, providing the ammunition they need for discussions within their department as well as with HMT.

Departmental Non-Executives: Wise departments will be using their Non-Execs to test and challenge plans, to ensure the options presented to the Treasury are as strong as possible. The most successful will be using Non-Execs to build a wider hinterland of support for their plans across government. How departments use their Non-Execs is likely to depend on the personal relationships between the Board and Secretary of State.

The Treasury: Clearly it is beneficial to match engagement with spending departments with similar engagement with Treasury specialists, but across its 1,000+ civil servants, the teams looking at specific policy areas are relatively small (between 10-25 on most departmental issues), and so are likely to focus on the most complex, expensive, or politically sensitive issues.

Labour MPs: Every Secretary of State will want MPs to lobby the Treasury on behalf of their department’s spending priorities. Communicating the investment, jobs, and local electoral benefits of a proposal to relevant back benchers (e.g. by providing constituency-level data, or by identifying relevant Labour networks to partner with) is key.

Ultimately, spending decisions are made by Ministers – meaning any proposals must pass both financial and political tests. With, in principle, £1.3 trillion of public spending under review, organisations that provide clearly thought-out suggestions, with easily-communicated political and economic benefits, are likely to cut through.

Understand the political context: Special Advisers and Ministers will gravitate to suggestions where the ‘sell’ has been thought through. As well as being operationally beneficial, how will your proposal be communicated to the public, other stakeholders, the media, and the wider industry?

Use your platform: Reports of low business confidence – in the economy, and the government – abound. Ministers will be keen to reset this narrative by securing the endorsement of key firms and business leaders to promote the outcomes of the Spending Review. The launch of the government’s Industrial Strategy in the Spring provides another key moment to offer this support.

Amplify your story: Match well-researched evidence with a compelling ‘surround-sound’ narrative – using media engagement, creative content, and policy influencers to illustrate how your proposals align with Labour’s principles, the impact for working people and public service users, and to highlight examples of business investment and economic growth. (But avoid high profile campaigns purely pleading a special interest, which are likely to be both ineffective, and frustrate Ministers and officials).

To discuss how your business can prepare for the Spending Review, please contact Marc Woolfson: marcwoolfson@wacomms.co.uk.

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Budget Analysis

Rachel Reeves has delivered the first Budget of this Labour Government to fix the UK’s foundations and deliver on the promise of change.

The Budget follows months of warnings from the Chancellor and Prime Minister that “difficult decisions” will be necessary to embrace the harsh light of fiscal reality and address the £22 billion black hole, which Rachel Reeves has claimed was left by the previous administration. While the Government’s intention is to protect ‘working people’, decisions such as the scrapping of winter fuel payments for millions of pensioners and increasing the cap on single bus fares means those on the lowest incomes will also be impacted.

Much of the pre-Budget debate has centered on the Government’s decision to increase Employer National Insurance Contributions (NICs). They have faced criticism as to whether this is an outright breach of their pre-election pledge not to increase taxes on working people, or a technical loophole that keeps them within the margins of the manifesto. Either way, this represents the Budget’s largest tax rise and will generate more than £20bn which the Chancellor hopes will go some way towards changing the outlook for public services.

Ultimately, the stakes for business are high in this Budget. Some commentators have argued the combination of increasing Employer NIC contributions and the National Living Wage, as well as legislative measures such as the Employment Rights Bill, could all stifle the pro-growth agenda just weeks after the landmark International Investment Summit. Criticism has been levied at Government from a range of industries who warn these measures will squeeze smaller and medium-sized businesses and result in fewer jobs at a time when Government is striving to dramatically increase economic participation.

The changes announced today will raise taxes by £40 billion. Reeves’ central message to business is to pick up the bill now in return for a steadier operating environment in the long-term.

To find out more about what today’s announcements mean for your sector, and how your organisation can shape the discussion, get in touch at contact@wacomms.co.uk.

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Posts Tagged ‘Rachel Reeves’

Spring Statement 2025 – tough choices and tighter margins

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

Further, faster, higher – planes and politics

Engaging with the 2025 Spending Review

Budget Analysis

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