Spring Forecast 2026

The Chancellor, Rachel Reeves, presented the Spring Forecast on 3 March 2026. In a statement to the House of Commons, she responded to the Office for Budget Responsibility's (OBR's) interim update on the economy and public finances.

Spring forecast

The Chancellor told MPs she had “restored economic stability” as she presented the Office of Budget Responsibility's (OBR's) March 2026 economic and fiscal outlook. As part of the government's policy of one Budget a year, no new tax or spending policies were announced. 

The OBR's forecast was being finalised as the conflict in the Middle East began to escalate. The OBR warned that this conflict could have a “very significant” impact on the global and UK economies.

The main points from the OBR were:

  • Gross Domestic Product (GDP) growth is expected to slow from 1.4% in 2025 to 1.1% in 2026.
  • Inflation is anticipated to fall faster than previously expected, falling from 3.4% in 2025 to 2.3% in 2026 and 2.0% (the Bank of England's target) from 2027 onwards.
  • The unemployment rate is forecast to rise from 4.75% in 2025 to a peak of 5.3% in 2026.
  • Public sector net borrowing is projected to fall from 5.2% of GDP in 2024-25 to 4.3% of GDP in 2025-26. It is then forecast to decline gradually over the medium term to reach 1.6% of GDP in 2030-31.
  • Taxes as a share of GDP (‘tax take’) is forecast to increase from 34.5% in 2024-25 to a peak of 38.5% by 2030-31; an "historic high".

The Chancellor opened her statement to parliament with the words, "This government has the right economic plan for our country". She set out how the government is seeking to build a stronger and more secure economy, claiming that by the next election, and after accounting for inflation, people will be £1,000 better off.

It was acknowledged that, not least due to events in the Middle East, the world is becoming more uncertain, with the Chancellor expressing the need to secure the economy against shock. Rachel Reeves outlined that the government would chart a course through uncertainty, and that she was proud to be the Chancellor delivering the biggest uplift in defence spending since the Cold War. 

After the Chancellor finished her statement, the OBR's March 2026 economic and fiscal outlook was published.

The OBR's economic and fiscal outlook 

The OBR noted that the fiscal context for the next Budget will remain challenging.

  • UK government borrowing and debt are currently at elevated levels compared to recent history and to the average of advanced economies, but are in line with the G7 averages.
  • Over the past two decades, UK public sector debt as a share of GDP has nearly tripled and, on a comparable basis, is nearly double the advanced-economy average.

While successive governments have set out medium-term plans to reduce borrowing from this level, these were subsequently pushed back due to the impact of further shocks, weak economic growth, and decisions to loosen fiscal policy in the short term.

In good news for the government, the OBR reports that estimated fiscal headroom has risen since the November 2025 forecast.

  • For 2029-30, a surplus of  £23.6 billion is now predicted (previously £21.7 billion). This is expected to increase to £30.3 billion in 2030-31 (previously £24.6 billion).

Summary of economic outlook

  • GDP growth is expected to slow from 1.4% in 2025 to 1.1% in 2026.
    • The forecast for 2026 is now 0.3 percentage points lower than in November 2025.
    • GDP growth is expected to pick up to an average 1.6% a year from 2027 to 2030.
  • Real GDP per person is forecast to grow at an average rate of 1.1% a year between 2026 and 2030. 
    • This is an indicator of changes in average standards of living and is marginally higher than in the November 2025 forecast.
  • The unemployment rate is forecast to rise from 4.75% in 2025 to a peak of 5.3% in 2026.
    • After peaking in 2026, the OBR expects the unemployment rate to fall gradually to its estimated equilibrium rate of 4.1% by 2030.
  • Nominal weekly wage growth is forecast to slow to around 3.5% in 2026 and then average 2.25% a year.
    • This is broadly in line with the November 2025 forecast and contributes to forecast CPI inflation falling from 3.4% in 2025 to 2.3% in 2026 and 2.0% from 2027 onwards.

Summary of fiscal outlook

  • Public sector net borrowing is projected to fall from 5.2% of GDP in 2024-25 to 4.3% of GDP in 2025-26. It is then forecast to decline gradually over the medium term to reach 1.6% of GDP in 2030-31.
    • This is a slightly faster pace of decline than in the November 2025 forecast, with borrowing revised down by £8 billion in 2030-31 compared to November, largely due to an improved receipts forecast.

Risks and uncertainties

  • There remain significant risks and uncertainties around the OBR's central forecast. 
  • The geopolitical situation and global trade policy remain highly volatile. Conflict in the Middle East, which escalated as the OBR was finalising its report, could have very significant impacts on the global economy, particularly energy markets.

What did the OBR say on taxes? 

Taxes as a share of GDP (‘tax take’) is forecast to increase from 34.5% in 2024-25 to a peak of 38.5% by 2030-31; an "historic high". Within this:

Income Tax

  • Income Tax (excluding Self Assessment (SA)) and National Insurance Contributions (NICs) are forecast to raise £480 billion in 2025-26, an 11.7% increase from 2024-25. Receipts are then forecast to rise to £600 billion in 2030-31.
  • Non-SA Income Tax and NICs receipts are expected to be £1.5 billion lower in 2025-26 relative to the November 2025 forecast, reflecting weaker than expected near-term labour market data since November.
  • Self-assessed Income Tax is forecast to raise £56 billion in 2025-26, a 16.0% increase on 2024-25. Reforms to the non-domicile tax regime are expected to drive a sharp rise to £64 billion in 2026-27.

Capital Gains Tax (CGT)

  • CGT is forecast to raise £22 billion in 2025-26, a 60% increase from 2024-25 owing to increased disposals of assets in 2024-25 seeking to benefit from lower CGT rates ahead of anticipated policy changes at the October 2024 Budget.

Inheritance Tax (IHT)

  • IHT receipts are forecast to be £9 billion in 2025-26, a 4.6% increase on 2024-25. Receipts are then expected to continue to increase, reaching £15 billion in 2030-31.
    • This is driven by rising equity and house prices, a growing proportion of deaths being subject to IHT, and the impact of the IHT reforms announced in the October 2024 Budget, such as the extension of IHT to inherited pensions and restrictions on Agricultural Property Relief (APR) and Business Property Relief (BPR).
      • The October 2024 IHT reforms will account for around 14% of total revenue by the end of the forecast.
    • The change announced in December 2025 to increase the allowance for 100% APR and BPR from £1 million to £2.5 million reduces estimated receipts by £0.1 billion in the medium term.

The government's fiscal rules

In October 2024, the government set its fiscal rules under which it intends:

  • That day-to-day public spending, such as on welfare and public services, will be met by revenue by 2029-30.
  • For net financial debt to fall as a share of UK economic output in 2029-30.

The OBR has historically assessed whether the government is set to meet these rules via the two economic forecasts that it is required to produce each financial year

However, following changes announced at Autumn Budget 2025, the OBR now only formally assesses performance against the rules once a year, at the Budget. This meant that, for the first time, the 2026 Spring Forecast did not include a formal assessment of the government's ability to meet its fiscal rules. 

This new approach is part of the Chancellor's desire for the Budget to be the only event where the government makes major tax and spending policy announcements, in a bid to provide greater certainty for households and businesses. 

External links

Office for Budget Responsibility: March 2026 Economic and fiscal outlook

HM Treasury press release: Spring Forecast 2026: The right economic plan for Britain

HM Treasury: Spring Forecast 2026 speech