Last week, the Chancellor of the Exchequer, Rachel Reeves, delivered her response to the Office for Budget Responsibility’s (OBR) Spring Economic Forecast. Unlike the Autumn Budget, the Spring Forecast was not intended to introduce major fiscal changes. Instead, it served as an update on the state of the economy and public finances, and an opportunity for the Chancellor to reinforce her economic narrative.

Unfortunately for the Chancellor, fast-moving events in the Middle East may well have a deep and sustained impact on global energy prices, meaning the OBR’s projections could quickly become out of date.

The economic outlook

Reeves used the moment to argue that the Government is delivering the “right economic plan for our country”, centred on restoring stability to the public finances, insulating the UK from global shocks and driving reform and infrastructure investment.

The Chancellor highlighted what she framed as improving economic fundamentals. The OBR forecasts that inflation and borrowing will fall over the forecast period, living standards will rise and economic growth will continue.

GDP is forecast to grow by 1.1% in 2026, 1.6% in 2027 and 1.6% in 2028. While growth in 2026 is slightly slower than expected at the time of the Autumn Statement, it is stronger in the subsequent two years, leaving the overall average across the forecast period broadly unchanged. GDP per person is now forecast to grow more strongly than expected in the Autumn, increasing by 5.6% over the course of the Parliament.

Unemployment is expected to peak at 5.3% later this year before falling to 4.1% by the end of the forecast period (2030), which would leave it lower than at the start of the Parliament.

However, while the headline figures point to stability, the wider economic context remains uncertain. With global geopolitical tensions ongoing and energy markets volatile, the picture may be more challenging than the forecast suggests.

A more policy-heavy growth strategy to come

Interestingly, Reeves signalled that a more substantive growth strategy will be set out in her upcoming Mais Lecture. She indicated that this will focus on three themes: strengthening post-Brexit trade relations with the EU, backing innovation and artificial intelligence, and transforming UK economic geography through regional and city-led growth.

In effect, the Spring Forecast was positioned as a staging post, with the Chancellor reserving more detailed policy interventions for the weeks ahead.

Education and skills

As in previous fiscal moments, the Chancellor framed social policy as economic policy. She reiterated the Government’s commitment to 30 hours of funded childcare, presenting it as a pro-growth reform that supports labour market participation. The scrapping of the two-child limit was described as the largest reduction in child poverty since records began.

On skills, Reeves acknowledged that apprenticeship starts have fallen by 40% over the past decade. She referenced additional investment to reform the apprenticeship system and highlighted the £820 million Youth Guarantee, designed to ensure that every young person has access to a job, training or further support. The Chancellor was critical about the rise of young people not in education, employment or training (NEETs) and stated that reforms to support NEETs into education, employment or training, would be announced shortly. Similarly, changes to the apprenticeship system are expected to be announced to support more young people into fulfilling employment that supports the wider economy.

The Chancellor also pointed to the SEND reforms announced in last week’s ‘Every child achieving and thriving’ white paper, arguing that the fiscal headroom created by her economic approach enables the Government to invest in long-term public sector reform.

Future projections

Overall, the Spring Forecast contained no new fiscal announcements or change to day-to-day spending plans. Instead, it was used as a platform to reflect on the OBR’s forecast and reinforce the Government’s commitment to stability, fiscal discipline and longer-term reform.

For the education and skills sector, there were warm words and reaffirmed commitments, but no new funding or structural reforms announced at this stage.

In the meantime, the durability of the OBR’s projections will depend not only on domestic policy choices, but on global economic conditions that remain outside the Government’s control.