Rachel Reeves unveiled her plans in the Spending Review.
Freeloadin' Rachel Reeves, previously known as the chancellor, dropped her 2025 Spending Review on June 11, declaring departmental budgets and infrastructure investments for the following three years.
In essence, the departmental budgets are set to swell by a real-terms 2.3% per year until 2028/29, with some areas like healthcare gearing up for a more substantial surge. Defense, housing, and transport are additional sectors that will be under the spotlight.
Reeves snapped her fingers, announcing an extra £29 billion annually for the NHS, £39 billion over the next decade for social housing, and a commitment to lift defense spending to 2.6% of GDP by April 2027.
Not everyone was clapping along, however. The opposition's Shadow Chancellor, Mel Stride, grumbled that the government's declarations amounted to a "spend now, tax later" review, stirring curiosity about potential tax hikes during the Autumn Budget.
What happened at the Spending Review?
The focal point of the new spending plans veered towards beefing up the health and defense budgets, along with additional funding for housebuilding, education, and energy.
Health
Reeves unveiled "an record cash investment" for the NHS, increasing the daily funding by 3% in real-terms, which translates to an extra £29 billion annually. Slashing NHS waiting times and amplifying appointments were potent promises from the Labour manifesto, both of which Reeves outlined during her speech.
The NHS, she said, remains the "most cherished public service" in Britain, and she took the opportunity to applaud Labour's accomplishments throughout this parliament. The government discloses that it has hired 1,700 new GPs, delivered an additional 3.5 million NHS appointments, and slashed waiting lists by 200,000, as per Reeves.
Defense
Following last month's announcements by the prime minister in the Strategic Defense Review, Reeves greenlit an increase in defense spending to 2.6% of GDP by 2027. This decision will free up another £11 billion over the period outlined in the Spending Review. The government claims this investment will boost infrastructure across the country, transforming Britain into a "defense industrial superpower."
Reeves also reiterated that £4.5 billion will be dedicated to the manufacturing of munitions and that £6 billion will be directed toward the renewal of the UK's nuclear submarine fleet. A substantial chunk of this funding will come from budget cuts to the international development budget announced in February.
Additional military funding could be forthcoming in the future, as documents published after Reeves's speech showed an ambition to hit 3% during the next parliament—provided economic and fiscal conditions allow.
Besides more defense spending, Reeves declared that £280 million more per year would be earmarked for a new "Border Security Command" and affirmed that hotels would no longer be used for housing asylum seekers by the end of the parliament, in anticipation of savings totaling £1 billion annually.
Police
Police spending power will grow by 2.3% per year in real terms throughout the Spending Review period, spanning three years. The government also aims to deploy an additional 13,000 police officers, community support officers, and special constables into neighborhood roles. Tackling crime was a crucial pledge during the lead-up to the election, with Labour promising to cut serious violent crime by half and enhance trust in the police and justice system.
An upcoming whitepaper will elucidate a program of police reform, purportedly aiming to "enhance standards, utilize technology, increase effectiveness, and improve accountability," as the government has stated.
Housing
Affordable and social housing will receive a £39 billion investment over the next decade, according to Reeves, marking the "biggest cash injection in fifteen years" in this sector. This money will be apportioned as grants to municipal authorities, private developers, and housing associations, laying the groundwork in some areas, such as Blackpool, Sheffield, Swindon, and Preston.
Homes England, the public body that funds affordable housing, will be designated as a public financial institution, receiving £10 billion for financial investments to advance the government's homebuilding objectives.
Energy
The UK's energy sector will see increased investment following the government's endorsement of the construction of a new nuclear reactor at the Sizewell nuclear power station, with £14.2 billion contributing to the project. Reeves is also set to invest £2.5 billion into studying nuclear fusion, with Rolls-Royce identified as the government's favored bidder to construct the UK's first small modular nuclear reactor.
Apart from nuclear energy production and research, Reeves disclosed that millions would be invested in carbon capture schemes, including aid for Acorn in Aberdeenshire and Viking in Humberside. Reeves believes that these investments will lower household energy bills and decrease the nation's reliance on foreign oil and gas.
Education
More funding will trickle down to the Department for Education, with a core schools budget of £4.5 billion and an additional £2.3 billion to repair dilapidated schools. Reeves also confirmed that free school meals will be expanded to all children living in families receiving Universal Credit. The government projects that this scheme will enable over half a million additional children to benefit from free school meals and help 100,000 children escape poverty.
Transport
A transportation infrastructure boost of £15 billion has already been announced for England. This cash will be used by mayoral authorities for projects like trams, trains, and buses in their respective regions. Reeves pledged £3.5 billion to upgrade the Transpennine Route between York and Manchester and £2.5 billion for the continuous development of East-West Rail, connecting Oxford and Cambridge. Wales will receive £445 million to invest in its railways across the next ten years.
Business and technology
An additional £25.6 billion will be infused into the British Business Bank, a government-owned bank primarily lending to small to medium enterprises. This increase equates to a two-thirds hike in its "financial might," as per Reeves. Reeves also declared that £1.2 billion per year will be assigned to youth training and upskilling programs, along with a heightened provision of apprenticeships.
Furthermore, £2 billion was set aside for the execution of the government's AI Action Plan, first unveiled in January.
Winter Fuel Payment
Reeves reaffirmed the government's decision to restore the Winter Fuel Payment for the "majority" of pensioners—the government estimates that about three-quarters will qualify. Detailed information about this policy reversal was initially revealed on June 9.
One of Labour's first moves upon taking office was to means-test the benefit, meaning it would only be granted to pensioners who received Pension Credit or other income-related benefits. The move sparked a robust backlash.
Understanding the Spending Review
The Spending Review serves as the government's mechanism for calculating and disbursing departmental budgets over the long term—typically for three or four years. It is led by the chief secretary to the Treasury, who initiates preliminary plans, and the chancellor of the exchequer, who refines and approves them.
The funding for public services like healthcare, schools, and transportation infrastructure comes from these departmental budgets. Therefore, boosts and cuts to them will influence the funding of public services.
In addition to daily departmental spending, which encompasses salaries, supplies, and administrative costs, the review also considers investments like infrastructure investments in railways, schools, and hospitals.
Spending Reviews are not conducted annually, making this review the first since 2015 to transpire outside a global pandemic. The previous review took place in 2021 under a Conservative government.
- The 2025 Spending Review, led by Chancellor Freeloadin' Rachel Reeves, set departmental budgets for the next three years with an increase of 2.3% in real terms annually until 2028/29.
- One of the key areas receiving substantial investment is personal finance; an extra £29 billion every year will be allocated to the National Health Service (NHS) and £39 billion over the next decade for social housing.
- In terms of business and technology, additional funding of £25.6 billion will be allocated to the British Business Bank, with the intent to boost support for small to medium enterprises.
- The Spending Review also covers the general-news domain, as it serves as the government's tool for determining and distributing departmental budgets for long-term investments in crucial areas, such as defense, education, and transport, among others.
