Understanding the Spring Statement 2025

Although the Chancellor repeatedly stated that this was a Spring Statement and not a Mini Budget, the inevitable rumours still circulated about what would and wouldn’t be included.

As Rachel Reeves got to her feet, it was already clear that the challenging economic environment of the last few years isn’t getting any easier and the Office for Budget Responsibility (OBR) has now downgraded their growth forecast for 2025 from 2% to 1%. This might not seem that significant, but this equates to a 50% cut in anticipated growth. On the bright side, growth for the next four years has, for now, been upgraded to 1.9% next year, 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029.

Going into the Statement, the Chancellor had headroom (i.e. the amount of leeway before the government would need to break its self-imposed fiscal rules) of £9.9bn. The OBR’s forecast indicated that without any changes, the current budget would be in a deficit of £4.1bn by 2029/30. This is obviously not good news but Ms Reeves went on to outline that, as a result of the steps being announced, while the deficit would grow to £36.1bn in 2025-26, it would then start reducing to £13.4bn in 2026-27, and then a surplus of £6.0bn in 2027-28, £7.1bn in 2028-29 and £9.9bn in 2029-30. In other words, in five years’ time we will be back where we started.

Make of that what you will, but £9.9bn is a very fine margin. In fact, it’s the third lowest margin against fiscal rules since 2010. And let’s not forget that such a small surplus could easily be erased by a future downgrade from the OBR.

With no further tax rises (at least for now), the key steps taken to protect and stimulate the economy include:

- A reduction in day-to-day public spending of £6.1bn by 2030

- Additional cuts to universal credit

- An extra £2bn for ‘affordable’ homes

- £600m to train up to 60,000 construction workers

- £2.2bn additional defence spending in the next financial year

- More staff and stronger powers to tackle tax avoidance

Whether these measures will be enough to keep government spending within their own fiscal rules remains to be seen, but some commentators are already predicting direct or indirect tax rises in this year’s Budget. In the meantime, let’s take a look at the key points affecting fleet operators and drivers, some of which didn’t make the speech but were included in the supporting documents released immediately afterward.

£4.8bn to the strategic road network in 2025–26

The government has committed £4.8bn to the Strategic Road Network in 2025-26. This includes £1.3bn for road renewals. Together with the £1.6bn set aside for local road maintenance, it is hoped that this goes some way towards addressing the 100,000 miles of roads across England and Wales which have less than 15 years of structural life remaining.

Streamlined infrastructure planning

The Planning and Infrastructure Bill is designed to streamline planning processes, making it quicker and easier to gain consent for housing and critical infrastructure. Further details of the associated funding will be announced in the June Spending Review.

While much of the government’s focus is on the provision of affordable housing, these developments need to be integrated with the existing road network and improvements made to handle increased levels of traffic. It is therefore envisaged that these streamlined approval processes will help to accelerate vital roadbuilding and transport improvement projects.

Removing the Climate Change Levy (CCL)

The government’s stated aim is to remove CCL costs from electricity used in the production of hydrogen. This will be of keen interest to commercial fleet operators who are looking for a cost-effective and operationally viable alternative to battery electric vehicles.

In terms of the government’s environmental goals, the source of the electricity is also important. If renewable energy is used, the process is considered green hydrogen, rather than the more common grey hydrogen produced from natural gas using a process called steam methane reforming (SMR).

To create green hydrogen, water is placed into a special device called an electrolyser. Inside, there are two electrodes, one positive (the anode) and one negative (the cathode). When electricity passes through the water, it facilitates a chemical reaction. Hydrogen gas then collects at the cathode, while oxygen forms at the anode. The resulting hydrogen can then be captured and transported to refuelling stations.

As things stand, the CCL on electricity increases the cost of green hydrogen production, resulting in an unwanted, and arguably avoidable, barrier to the development and widespread use of hydrogen fuel cell vehicles.

A firm commitment to removing this additional cost is welcome news and there may be more changes on the horizon, with a wider review of the Climate Change Levy already in the planning stages.

Addressing the skills shortage

The government clearly understands that it cannot deliver on the pledge to build a sizeable number of new homes without investing in training the next generation of construction workers, and £625m will be spent in England over the next four years to do just that.

However, construction is not the only industry experiencing a skills shortage. The Institute of the Motor Industry (IMI) recently predicted a shortfall of 3,000 EV qualified technicians by 2031, rising to 16,000 by 2035. With no announcements in the Spring Statement, we may need to wait until the Spending Review, or even the Autumn Budget, to see how the government intends to ensure that there are enough EV qualified technicians for the rapidly increasing number of electric vehicles on the road.

A final word

In closing, we should remember that this was a Statement not a Budget and, while the economic situation means that some actions simply could not wait until the main fiscal event of the year, additional measures and policy announcements still to come are likely to have a more direct impact on fleet operators and individual drivers.

In the meantime, we will continue to provide the information and guidance needed to help you make informed fleet decisions. To find out more about how we can help, just get in touch.

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