Chancellor Rachel Reeves is poised to deliver an update on the health of the British economy on Wednesday.

The spring statement is not a formal budget – as Labour pledged to only deliver one per year – but rather an update on the economy and any progress since her fiscal statement last October.

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While it’s not billed as a major economic event, Rachel Reeves has a big gap to plug in the public finances and speculation has grown she may have to break her self-imposed borrowing rules.

Here, Sky News explains everything you need to know.

What is the spring statement?

The spring statement is an annual speech made by the chancellor in the House of Commons, in which they provide MPs with an update on the overall health of the economy and Office for Budget Responsibility (OBR) forecasts.

It is one of two major financial statements in the financial year – which runs from 1 April to 31 March.

The other is the autumn budget, a more substantial financial event in which the chancellor sets out a raft of economic policy for the year ahead.

Typically, the spring statement – which was first delivered by ex-chancellor Phillip Hammond in 2018 – gives an update on the state of the economy, and details any progress that has been made since the autumn budget.

What could be announced?

The government has already announced some big cuts – and there may be more to come.

Ms Reeves could decide to extend the freeze on thresholds at which people start to pay different rates of income tax, beyond the current freeze, which is due to end in April 2028.

The government could also raise the relief rate for struggling retail, hospitality, and leisure businesses after cutting it to 40% in the October budget.

The chancellor is expected to announce £400m in spending on the government’s new UK Defence Investment body to “harness UK ingenuity and boost military technology”, according to The Mirror.

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She has been called on to reduce the £20,000 tax-free annual limit on cash ISAs to £4,000 to encourage more people to invest their savings in stocks and shares – a move that could hurt cash ISA savers.

To read more on what is expected to be announced in the Spring Statement, and what has already been announced, check out Sky News political reporter Alix Culbertson‘s piece here.

When will Rachel Reeves deliver it?

The OBR, which monitors the government’s spending plans, will publish its forecast on the UK economy on 26 March.

It is required to produce two economic forecasts a year, but the chancellor said she would only give one budget a year to provide stability and certainty on upcoming tax changes.

The OBR will also provide an estimate on the cost of living for British households, and detail whether it believes the Labour government will adhere to its own rules on borrowing and spending.

The chancellor will then present the OBR’s findings to the House of Commons, and make her first spring statement.

This will be responded to by either Conservative leader Kemi Badenoch or shadow chancellor Mel Stride.

Why does it matter?

The UK economy is thought to be underperforming – potentially due to global factors, like Donald Trump’s trade tariffs – and there are rumours that the chancellor could consider breaking her own rules on borrowing in response.

The economy contracted slightly in January, while inflation has climbed to a 10-month high of 3%. Meanwhile, the government has committed to boosting defence spending to 2.5% of GDP by 2027 – an expensive task.

Ms Reeves’s fiscal rules mean she cannot borrow for day-to-day spending – leaving cuts as one of her only options. Her other “non-negotiable” is to get debt falling as a share of national income by the end of this parliament.

It is expected that welfare cuts will be part of the spring statement package to help the chancellor come within her borrowing limit.

Our deputy political editor Sam Coates said earlier in March there would be a “four-point plan” involving planning reform, Whitehall cuts, regulation cuts and welfare cuts. The government has already announced NHS England will be scrapped.

In short, the Treasury believes Ms Reeves must maintain £10bn in headroom after months of economic downturn and geopolitical events since last October’s budget.

It is widely expected the OBR will confirm that this financial buffer has been wiped clean.

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Where can I watch the spring statement?

The spring statement will be delivered in the House of Commons on Wednesday 26 March, directly after Prime Minister’s Questions, which is usually finished by around 12.30pm.

You’ll be able to keep up to date on Sky News – and follow live updates in the Politics Hub.

The government is telling local councils they must publish data on how many potholes they have fixed or risk losing their share of an extra £500m set aside for fixing roads.

From the middle of next month, local authorities across England will start to receive their allocation of the £1.6bn for fixing roads across the country.

But in order to get the full amount, all councils must publish annual reports on how many potholes they’ve filled – or see a quarter of the additional £500m in funding the government has allocated this year withheld.

By 30 June, all councils must publish reports detailing how much they are spending, how many potholes they have filled, what percentage of their roads are in what condition, and how they are minimising disruption.

Meanwhile, the transport secretary is unveiling a funding package of £4.8bn for 2025-6 for National Highways to deliver critical road schemes and maintain motorways and major A-roads.

This new money will mean “pivotal” road construction schemes can be pushed forward, the government said.

This is a key part of Downing Street’s drive to ensure the voting public sees and feels the difference the government is making in their local communities as they fight off a challenge from Reform UK.

Prime Minister Sir Keir Starmer said: “The broken roads we inherited are not only risking lives but also cost working families, drivers and businesses hundreds – if not thousands of pounds – in avoidable vehicle repairs.

“British people are bored of seeing their politicians aimlessly pointing at potholes with no real plan to fix them. That ends with us.

“We’ve done our part by handing councils the cash and certainty they need – now it’s up to them to get on with the job, put that money to use and prove they’re delivering for their communities.”

Transport Secretary Heidi Alexander said: “After years of neglect we’re tackling the pothole plague, building vital roads and ensuring every penny is delivering results for the taxpayer.”

Responding to the announcement, the transport spokesperson for the Local Government Association said the cash will “help start to address the previously ever-growing backlog of local road repairs” which, he added, “could take more than a decade to fix”.

Councillor Adam Hug also called for the government to “play its full part” by using its Spending Review “to ensure that councils receive sufficient, long-term funding certainty, so they can focus their efforts on much more cost-effective, preventative measures”.

The Conservatives have responded by claiming Labour “want credit for handing councils a pothole sticking plaster”.

Gareth Bacon, shadow transport secretary, continued: “Labour are running on empty. They’ve got no plan for motorists, no grip on the problem, and no credibility.

“Voters shouldn’t be fooled – Labour aren’t fixing the roads, they’re steering Britain into a ditch.”

Spending on roads and cuts in Whitehall

The spending on roads across England comes as the chancellor is preparing to make billions of pounds of spending cuts at the spring statement on Wednesday.

A turbulent economic climate since October means the £9.9bn gap in her fiscal headroom (the amount she could increase spending or cut taxes without breaking her fiscal rules) has been wiped out.

The government has confirmed it will force the civil service to slash £2bn a year from its budget by cutting administration costs by the end of the decade.

Rachel Reeves told Sky’s Sunday Morning With Trevor Phillips she is “confident” they can cut 10,000 jobs from “back office” roles to ensure resources can be spent on front-line services.

A total of £5bn is expected to be saved by making it more difficult to qualify for Pip, and also abolishing the work capability assessment in 2028, which determines whether someone on universal credit is fit to work.

Quangos are also on the chopping block, with the prime minister having already announced NHS England is being abolished to both bring the health service back under more direct ministerial control, and also save money.

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Money is being redirected towards defence, with the chancellor expected to announce £400m in spending on the government’s new UK Defence Investment body to “harness UK ingenuity and boost military technology”, The Mirror reports.

And the full details of how international aid funding will be reallocated to defence are expected, after the prime minister said UK defence spending will rise to 2.5% of GDP by 2027.

Speaking to Trevor Phillips, the chancellor said “the world has changed” as she laid the groundwork for the spring statement.

“We’ll respond to the change and continue to meet our fiscal rule,” she said. “But we’re also shaping the new world, whether that’s in the defence and security realm, or indeed on the economy.

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What could be in the spring statement?

The chancellor highlighted that “interest rates have been cut three times since the general election”, adding: “That’s a far cry from the 11% inflation and the interest rate hikes that we saw under the previous government.”

But shadow chancellor Mel Stride said the government has not “gripped the economy”, accusing ministers of having talked it down and having a negative impact on growth.