Our Reaction to Chancellor Rachel Reeves’ Spring Statement
Yesterday, Chancellor Rachel Reeves delivered her much-anticipated Spring Statement, outlining the government’s fiscal plan for the coming months.
Against a backdrop of mounting economic pressures, including high borrowing costs and lacklustre growth, the Statement announced additional welfare cuts beyond the changes to Personal Independence Payment (PIP) and Universal Credit announced last week, which had already represented the largest welfare cut in over a decade. These additional changes come after the OBR informed the Chancellor that the initial proposals would save less than planned, £3.4bn instead of the originally claimed £5bn. The new changes, which include a 50% cut and subsequent freeze for new claimants of the health element of UC, together bring this figure back up to £4.8bn.
The changes, largely a product of the Chancellors own self-imposed fiscal rules around borrowing and spending, and the governments repeated promises not to release a ‘tax and spend’ statement, are designed to restore some of the £9.9bn in fiscal headroom that has largely evaporated since the autumn budget.
Despite the announcement of cuts not only to PIP and Universal Credit, but also to the Civil Service and NHS England, Reeves has pushed back against accusations that the government is pursuing austerity policies, pointing to the investment in 18,000 new affordable and social homes in yesterday’s statement to distinguish herself and her spending plans from that of George Osbourne’s austerity regime.
For those focused on social value, the overall picture presented by the Chancellors’ Statement is certainly mixed, with promising steps taken in housing coupled with cuts to vital welfare programmes and spending reductions in public services. Here, we reflect on the key aspects of the statement, and what they mean for social value in the UK.
Affordable and Social Housing:
One of the most promising developments was the commitment to invest an additional £2bn to build 18,000 new social and affordable homes, a ‘down payment’ on plans later in the year to begin to deliver on the government’s pledge to build 1.5 million homes by the end of this Parliament.
From a social value perspective, this represents a positive step, with social housing in particular representing a cornerstone of efforts to tackle homelessness and combat the growing housing emergency. The creation of these homes will directly impact low-income households, providing stable, secure housing and enhancing community stability. Moreover, in the context of recent changes in procurement such as the Procurement Act (2023) and PPN 002, which have engrained social value deeper into procurement processes and placed a greater emphasis on social value delivery, there is a strong opportunity for local communities and supply chains to benefit from this investment. Developers vying for the contracts to build these homes will need to demonstrate how they can deliver additional social value—whether through local employment, sustainable construction practices, or community engagement. These contracts could become a significant avenue for driving social value outcomes that go beyond just providing housing.
Health-Related Benefit Cuts:
In contrast to the investment in housing, the £4.8bn reduction in health- related benefits, including cuts to PIP and Universal Credit, represent a more worrying development, with the cuts likely to have severe ramifications for vulnerable people relying on those benefits to cover the additional costs associated with disability and chronic health conditions, such as mobility, healthcare, and public transport. From a social value perspective, these reforms are concerning, and are likely to exacerbate inequality and face vulnerable populations with increased difficulties in accessing healthcare and employment. Despite government suggestions that the changes are designed to help recipients find work and reduce their reliance on the state, without PIP to cover the additional costs associated with disability, the reality is that the changes will likely make it harder for unemployed recipients to enter work, and have a negative impact on attendance and productivity for those already in work.
Civil Service Cuts:
Another policy that will have implications for social value is the planned 15% reduction in Civil Service running costs by 2029–30, which is expected to lead to the loss of thousands of public sector jobs. The government has framed these cuts as a necessary response to the expansion of the Civil Service during the pandemic, however, concerns are already being voiced by unions and public service advocates that this could result in delays, reduced service quality, and diminished access to crucial services.
This cut represents a potential reduction in the capacity of departments to deliver vital services, particularly in social welfare, housing, and education. Essential support that vulnerable individuals depend on could be stretched even thinner, leading to a significant deterioration in the quality of public services. If departments are forced to operate with fewer resources, it could directly undermine efforts to meet social value objectives in those sectors.
Defence and Foreign Aid:
Old news, but still one of the most controversial aspects of the government’s plans. The reduction in the UK’s international aid budget, from 0.5% of Gross National Income to 0.3% by 2027, to fund increased defence spending, has dominated headlines since it was first announced. The government insist the change is necessary to guarantee security in the context of a turbulent global political landscape, while international development groups and charities have condemned it as a betrayal. While increased security is an important and understandable objective, the reduction in the aid budget limits the UK’s ability to contribute to global poverty reduction and sustainable development. In essence, the shift in resources away from international aid to defence represents a narrowing of the UK’s social responsibility, both domestically and globally, at a time when the importance of social impact ought to be paramount. The decision could have far-reaching consequences for global social value and sustainable development, potentially straining relationships with international partners and reducing the UK’s influence in global social policy discussions.
Conclusion: A Mixed Bag for Social Value
The Spring Statement paints a mixed picture for social value. While the commitment to affordable housing and the potential for local social value creation through housing projects is encouraging, the cuts to health- related benefits and civil service jobs, and the reallocation of foreign aid to defence present serious challenges.
If the statement sends a clear message in relation to social value, it is that while the government may be broadly sympathetic, as recent changes in procurement would suggest, they are unlikely to pursue the creation of positive social value at the expense of economic imperatives. For this reason, as we continue to monitor these developments, it is clear that the government’s overall approach to social value will require careful scrutiny, and collaboration with key stakeholders across public, private and third-sector organisations will be more necessary than ever to ensure that it remains high on the agenda.
