Four things we learnt from Rachel Reeves’s spring forecast 2026

1. Rachel Reeves stuck to her commitment to make this a low-key affair

The chancellor was right to make today’s spring forecast a low-key affair. After failing last spring to stick to her pledge of having only one fiscal event a year, which led to the eventual U-turn on the attempted welfare reforms, Reeves was right to eschew new tax or spending measures and simply comment on the updated forecast. That decision was vindicated further by the volatile backdrop to the announcement – had she decided on flashy announcements of the sort chancellors often unveil in response to positive forecasts, she might have been forced to backtrack as the economic impacts of the growing conflict in the Middle East become clearer.  

The main policy change since the budget was to cover spending on SEND which, while substantial in size, reflects February’s white paper proposals and several months of policy development before this to address this known spending pressure. The improvement in receipts meant this could be accommodated while preserving (indeed increasing) the headroom she built in the autumn.

The government should stick to this approach going forward. This would bring the UK into line with international best practice and stop the unnecessary fiscal fiddling that has driven poor policy making in the past, as well as helping to avoid destabilising advance speculation.

2. The OBR forecast changed relatively little overall despite lots of moving parts

The Office for Budget Responsibility's (OBR) expectations for real GDP growth in 2026 have fallen from 1.4% to 1.1% while unemployment is expected to rise to 5.3%, but both growth and unemployment are then expected to improve in future years. Inflation will fall faster than was previously expected from 3.4% in 2025 to 2.3% in 2026, and 2.0% from 2027 onwards, with the decline due to falls in food price inflation and energy bills. However, the current conflict in the Middle East, which began after the OBR finalised its forecasts, means that an uncertain outlook for global energy prices will have spillover effects for the UK and the global economy. 

The OBR adjusted its migration assumptions to reflect new ONS estimates showing more British nationals are leaving the UK. But there may be a bigger adjustment to come, with the OBR exploring the migration outlook in its upcoming Fiscal Risks and Sustainability report – which takes a longer-term view of the UK economy and public finances. There could be a significant change in the autumn budget with implications for the public finances.

Overall, the OBR forecast suggests the government’s fiscal position is slightly improved compared to November. However, the size of this forecast-to-forecast adjustment is far from unusual and, in light of ongoing global instability, the OBR is right to warn that unanticipated events can have big negative impacts on the public finances.

3. Rachel Reeves avoided announcing new policy measures but may still face difficult decisions in the autumn

Reeves stayed true to her commitment to avoid major new policy measures in the forecast. The revised forecast reflects some relatively small changes announced since the budget on inheritance tax, business rates for pubs and joining Erasmus. The government used some of the improvement in public finances to fund an additional £4.1bn in 2028/29 to meet new commitments on SEND. Although the OBR express uncertainty about whether these measures will deliver all of the government’s anticipated savings, it judges them to have ‘materially reduced’ spending pressures compared to its November 2025 forecast.

But the OBR also details at length some of the potential upward pressures on spend. The incapacity benefits bill forecast is “highly uncertain”, while pressures on local government finances are also a risk: the OBR has to assume that the £1.1bn of ‘exceptional financial support’ allocated to 37 struggling local authorities in 2026/27 is a ‘one-off’, but it seems unlikely the government will be able to end the reliance on a source of funding used to plug financial gaps for nine consecutive years. These pressures, and others, will need to be addressed at the upcoming 2027 spending review.

Most striking of all is the OBR’s calculation that raising defence spending to the NATO target of 3.5% of GDP by 2035 would require an additional £40bn a year in today’s money. But the current spending review figure only envisages defence spending of 2.6% of GDP in 2028/29. The prime minister has indicated he would like to reach 3% by the end of the parliament, which would mean bigger increases in spending.

The chancellor may also be faced with demands for help to cushion energy bills rises, and pressure to drop the planned September fuel duty increase will become more acute if the US-Iran war puts lasting upward pressure on energy prices.

4. The chancellor might reveal more concrete policy proposals in the upcoming Mais lecture

The spring forecast was, rightly, shorn of new policy content. This meant that Reeves could reiterate that the government had the “right plan”, restate some of Labour’s policy changes, wheel out familiar phrases about “builders not blockers” and take pot shots at the Conservatives, Reform and the Greens. She may, however, regret heaping so much of the blame for the 2022/23 inflation spike on the Conservative government. 

The political knockabout in the Commons did not provide any hint of a tax strategy or a better growth plan, but the chancellor hinted that her second Mais lecture – which she will give in a fortnight – would focus on growth and potentially youth unemployment and inactivity. If that lecture becomes a more policy-rich event than this statement, then Reeves should use it to set as clear a direction as possible for the government towards the autumn budget. The Treasury now needs to use the extra thinking and planning time gained by downplaying the spring forecast to deliver the real rewards achieved by better policy making.