Spending Review
The Chancellor wrapped up her Spending Review by sayingshe had made her choices, and she has chosen national renewal. But Rachel Reeves will also be hoping that today’s statement is a chance for her to reset, with the long-awaited review an opportunity to shift the tone - and hopefully the polling - for the Chancellor and for the Government. She acknowledged that many people across the country are yet to feel the benefits of Labour being in charge but said that her choices are a reflection of the choices of working people. With headline announcements around defence, record investment in social and affordable housing, long-term infrastructure spending and an extra £29bn a year for the day-to-day running of the NHS, the Chancellor is hoping that this renewal will start to be felt.
Several announcements had been trailed in advance, including the U-turn on Winter Fuel payments, allowing Reeves to use today’s statement to focus on the priorities of security, economic growth and the nations’ health. There was an emphasis on investing in energy to shore up national security, with recommitments to Sizewell C, small modular reactors, and new announcements on carbon capture projects. The Government is also looking to back tech, with additional money for R&D and £2bn for their AI action plan. Whilst the Department for Health was the biggest winner, other public services will benefit, with the core schools’ budget in England set to reach £69.5bn by 2029. Elsewhere, looking to cut costs, the Chancellor committed to ending the use of hotels for asylum seekers in this Parliament and said she would be relentless in driving out Government inefficiencies.
Though Reeves took time to thank her Cabinet colleagues, some will be feeling more thankful than others. Whilst overall spending on Departments is set to increase by 2.3% over inflation, for some there will be a real-term cut, with Home Office spending down 1.7% a year to 2028-29, the Foreign, Commonwealth & Development Officelosing 6.9% and the Department for Transport down 5%. This comes after weeks of tense negotiations between Departments and the Treasury, where some managed to argue their case more convincingly than others.
So, whilst Shadow Chancellor Mel Stride labelled it a ‘spend now, tax later’ review, the Chancellor will be hoping that the spend is worth it, and that she has managed to balance her tight fiscal rules and need for economic security, with targeted investments and spending that will resonate with the electorate.
Key Announcements include:
•Each Department has committed to at least 5% savings and efficiencies by 2028-9.
Department for Energy Security & Net Zero
•£14bn committed to the Sizewell C nuclear plant.
•Great British Energy Nuclear will invest £8.3bn. in clean power this Parliament and £2.5bn will go towards nuclear fusion R&D.
•£13.2bn allocated to the Warm Homes Plan.
Department of Health and Social Care
•3% annual real-terms increase in day-to-day spending- adding £29bn annually.
•£2.3bn capital boost for NHS infrastructure through 2030, a nearly 50% rise in NHS tech budget, and £10bn invested in NHS digital services.
•Mental health support teams in 100% of schools by 2029-30.
Ministry of Justice
•£7bn to build 14,000 new prison places by 2031.
•£700m extra annually for the probation service by 2028.
Department for Business & Trade
•Two-thirds boost to the British Business Bank’sfinancial capacity – increasing it to £25.6bn.
Department for Science, Innovation & Technology
•£86bn to fund research into areas such as drug treatments and longer-lasting batteries.
•£22.6bn per year for research and development by 2029-30.
•£2bn to back the AI Action Plan, and £1.2bn to drive forward digital priorities.
Department for Education
•£4.5bn in additional funding for schools by the end of the Spending Review, including a £2bn core budget increase and £4.7bn more per year by 2028-29.
•£2.4bn invested annually in the School Rebuilding Programme, with maintenance funding rising to £2.3bn per year by 2029-30.
•£2.6bn allocated from 2026-27 to 2029-30 for new mainstream school places to meet future demographic needs, £370m for school-based nurseries, and a cost cap on school uniforms.
Department for Work and Pensions
•£1.6bn extra per year by 2028-29 to continue the expansion of Government-funded childcare.
Ministry of Defence
•Spending will rise from 2.3% to 2.6% of GDP by April 2027, representing an £11bn increase.
•£15bn will be invested in a nuclear sovereign warhead programme, alongside £1bn for the UK’s first European laser-directed energy weapon.
•£4bn will go into autonomous systems, including £2bn this Parliament for technologies like land drone swarms.
Home Office
•£280m funding boost per year for the Border Security Command and £400m a year by 2028-29 to speed up the process of asylum processing, increase appeals capacity and continue asylum returns.
•2.3% increase to police spending power per year, creating 13,000 additional roles.
Department for Housing, Communities and Local
Government (Housing)
•£39bn over the next decade into the 10-year Affordable Housing Programme, with a focus on homes for social rent.
•£4.8bn in financial transactions over the next 4 years to catalyse additional private investment to deliver more homes.
•£2.5bn of low-interest loans for social housing providers to boost their capacity to invest in new development.
Department for Housing, Communities and Local Government (Devolution and Local Government)
•An updated Green Book will be published at the start of 2026, ensuring the rules do not work against investment in local regions.
•£50.9bn per year for Scotland, £19.3bn for Northern Ireland and £22.4bn per year for Wales (alongside £118m for the Welsh coal industry).
•Growth Mission Fund introduced to expedite local projects, to provide £240m of capital over the next 4 years, and 350 communities will receive additional funding to improve parks, youth facilities, swimming pools and libraries
Department for Transport
•£15.6bn investment for new rail, tram and bus networks via the Transport for City Regions (TCR) settlements.
•£2.6bn capital investment to decarbonise transport, including £1.4bn for the uptake of electric vehicles, and £400m for charging infrastructure.
•£2.3bn in the Local Transport Grant for local improvements including bus lanes, cycleways and congestion measures, representing a four-fold increase.
Department for Culture, Media & Sport
•£132.5m to support music, sport and drama through investment in facilities and libraries in schools.
•A National Youth Strategy to be published in the autumn.
•£2.9bn across DCMS’s entire capital programme to safeguard and modernise cultural and heritage institutions and expand access to local sport and physical activity.
Department for Environment, Food & Rural Affairs
•£2.7bn a year for the Sustainable Farming Initiative – a decrease from £5bn.
•£2.3bn through the Farming and Countryside •Programme and up to £400m from additional nature schemes.
•£4.2bn for new flood defences.
Foreign, Commonwealth & Development Office
•Reduce overseas aid to 0.3% of national GDP from 0.5%.
Cabinet Office
•£3.25bn Transformation Fund to modernise public services through technology and AI.
Government departments will deliver reductions in administration budgets of at least 11% in real terms by 2028-29, and 16% in real terms by 2029-30. These reductions will be made against 2025-26 administration budgets and will save an expected £2.2bn by 2029-30.
•Plans to reduce the Government’s London office estates and to build a new hub in York.