Despite Labour’s pledge to hold just one fiscal event in the autumn each year, next Wednesday’s Spring Statement is still a huge moment for Chancellor Rachel Reeves.

In an unforgiving task, she will have to share what is anticipated to be a grim economic forecast from the OBR and explain whether the UK’s public finances have met her fiscal rulesand whether her policies are producing any growth.

External commentators are not providing much hope for Reeves. The Bank of England has halved its 2025 growth forecast to 0.75% whilst last week the ONS showed that the UK’s economy had contracted by 0.1% in January.

But what do these numbers mean? Reeves left herself just £9.9bn of “headroom” within her rules at the Budget in October. With government borrowing costs still high that room has probably disappeared, meaning either tax rises or spending cuts needed to get back inside the rules.

Given some pretty unfavourable tax increases in the Autumn Budget, spending cuts may now be seen as the lesser of two evils – a bitter pill to swallow for a Labour government which has chastised Tory austerity for decades. The unknown is whether the axing of NHS England and £5bn in welfare cuts are enough and rumours are quickly enveloping several Whitehall departments (though the Ministry of Defence now sleeps soundly).

Whilst Reeves’s previous tax reforms angered farmers, private schools, and business leaders, the problem with spending cuts is she will anger some within her own party.

This Spring Statement was meant to be a low-key affair but economic headwinds and Donald Trump’s return to the Oval Office have seen to that. How Reeves responds – and how that response is subsequently received – will define whether the Chancellor’s political reputation takes another battering or has some of the dents from the Budget buffed out.

(Photo provided by Bloomberg)