Universal Credit: health element cut in Rachel Reeves' Spring Statement 2025 - 7 budget highlights and news

• Rachel Reeves has delivered her first Spring Statement, outlining key economic measures
• She confirmed that Universal Credit will be increased increased for some, but there will be cuts to the health element and a freeze for new claimants
• The Office for Budget Responsibility has projected a £500 annual boost in household income
• Reeves announced a £600 million investment to train 60,000 construction workers and improve public services
• There will be no new tax increases, but an emphasis on cracking down on tax evasion to raise £7.5bn

Chancellor Rachel Reeves delivered the first Spring Statement of her tenure today (March 26) in the House of Commons.

The Spring Statement, often referred to as a "mini-budget," serves as a mid-year economic review - unlike the autumn Budget, it doesn’t usually include comprehensive tax and spending plans.

Ahead of the her appearance in the Commons, there were concerns that Reeves might double down on welfare cuts announced last week by the Jobs and Pensions Secretary, Liz Kendall.

Those cuts included tightening eligibility for Personal Independence Payments (PIP) and reductions to Universal Credit, changes that sparked widespread criticism, with many fearing that further cuts could create more hardship for vulnerable people.

Indeed, some cuts to welfare did surface, with Universal Credit seeing further reductions. More on that below.

Read more: Rachel Reeves' Spring Statement 2025 - 8 of the biggest budget highlights and news

But in short, the Statement contained a mix of measures aimed at addressing immediate financial pressures for people, while also introducing more complex, long-term changes that may not affect everyone now, but could influence the economy over time.

Financial statements like these often come with a lot of jargon and technical language that can make it difficult for the average person to understand how the changes will affect their daily lives.

So we’ve sifted through it all to pick out the announcements most likely to impact ordinary people on a day-to-day basis...

Read more: Will Chancellor Reeves' 2025 statement leave UK residents better or worse off?

Universal Credit changes

Reeves confirmed an increase in the Universal Credit standard allowance from £92 per week in 2025-26 to £106 per week by 2029-30.

This change will directly benefit people who rely on Universal Credit for financial support, providing them with more money each week to cover essential costs.

Read more: Universal Credit and PIP: government reveals major changes and reforms to health benefits

But a more controversial move was also announced. The Universal Credit health element, an additional amount added for those with health-related issues, will be cut by 50% and frozen for new claimants.

This essentially means that people applying for Universal Credit with a health condition or disability will receive less financial support.

For new claimants, the health element will be frozen, meaning it won’t increase with inflation or other adjustments in the future.

Reeves didn’t spend too much time on this particular section of her statement - perhaps she was hoping it would fly somewhat under the radar?

Read more: Labour's PIP cuts shake-up news left me shaken - wellbeing matters

Improved household incomes

Reeves pointed to the latest projections from the Office for Budget Responsibility (OBR), which forecast that real household disposable income will grow at almost twice the rate previously anticipated.

As a result, households are expected to be, on average, £500 better off a year compared to earlier projections from the final budget delivered under the previous government.

Plans to tackle inflation

Reeves acknowledged the ongoing economic challenges, particularly rising inflation.

With inflation peaking at 11% under the previous government, the Chancellor confirmed that the Bank of England’s Monetary Policy Committee will continue to work towards meeting the current Government’s 2% inflation target.

Reeves projected that inflation will fall to 2% by 2027, as the Government aligns itself with the Bank's policy.

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Education and training initiatives

Reeves highlighted the Government's focus on skills development, particularly in the construction sector.

A £600 million investment will train up to 60,000 construction workers, with the introduction of 10 new technical excellence colleges across the UK - initiatives aimed at addressing the growing skills gap and support the country's evolving economy.

The Chancellor also confirmed a £1 billion investment to provide personalised employment support to help people back into work, as part of a broader £3.4 billion savings package.

Increased investment in public services

Reeves set out plans for significant investment in public services, with an average £2 billion increase in capital spending each year over the forecast period.

This investment will help drive economic growth and support essential services, particularly in defence.

£3.25 billion will also be brought forward for a new transformation fund to improve government efficiency and reduce running costs by the end of the forecast period.

Housing and planning reform

On the subject of Labour’s recently announced ambitious plans to reform planning regulations, Reeves said the OBR estimates that these changes could facilitate the construction of 1.3 million homes over the next five years.

This would put the Government within reach of its target to build 1.5 million homes during this parliament.

Reeves also committed to improving housing for military families in key areas like Plymouth and Aldershot.

No new tax increases, but a crackdown on evasion

In a key reassurance, Chancellor Reeves confirmed that there would be no new tax increases, and instead focused on tackling tax evasion, promising increased investment in HMRC's capacity to address the issue.

Reeves outlined plans to raise £7.5 billion by enhancing tax fraud investigations, with the aim of increasing the number of fraudsters charged by 20%. This initiative is expected to help restore public confidence in the fairness of the tax system.

Defence spending boost

In response to the changing global security landscape, the Government will raise defence spending to 2.5% of GDP, funded by a reduction in overseas aid, which will be reduced to 0.3% of gross national income.

Reeves announced an additional £2.2 billion for the Ministry of Defence in the next fiscal year, as well as a focus on advancing technologies like drones and AI.

The Government has also pledged to invest in advanced manufacturing and create skilled jobs in cities like Glasgow, Derby, and Newport.

What do you think about the announcements made in Rachel Reeves' Spring Statement? How do you feel the changes to Universal Credit and the focus on welfare will impact you or those around you? Let us know your thoughts in the comments.