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.

Read more: What could be announced in the spring statement?

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.

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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.

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.