Chancellor Rachel Reeves is poised to unveil her highly anticipated spending review, detailing funding allocations for the NHS, education, law enforcement, and other vital public services over the next several years.
The chancellor will highlight a planned £113 billion investment in Britain’s infrastructure, encompassing energy and transportation projects, in her Wednesday address, emphasizing a commitment to national renewal.
However, certain government departments may face real-terms budget reductions as the chancellor prioritizes health and defense spending.
This review will guide Labour’s government spending until the next general election, anticipated in 2029, outlining yearly operational budgets for the next three years and investment plans for the subsequent four.
Intense negotiations between ministers and the chancellor have characterized the process of determining departmental funding settlements.
Home Secretary Yvette Cooper finalized her department’s agreement on Monday, following appeals for increased police funding, while Housing Secretary Angela Rayner reached a deal on Sunday.
Rayner’s department is projected to receive £39 billion for a social and affordable housing program spanning the next decade.
Government sources indicate this investment will support the government’s target of constructing 1.5 million new homes by 2030.
The chancellor will also confirm the extension of the £3 bus fare cap in England until March 2027.
In a recent address, Reeves alluded to rejecting ministerial funding requests, citing constrained resources as a reflection of economic realities.
The government’s fiscal strategy has been influenced by sluggish economic growth, increased borrowing costs, and global economic uncertainty.
Last year’s autumn budget included £40 billion in tax increases to bolster the NHS and other public services.
Reeves is expected to assert on Wednesday that her spending plans are feasible due to the economic stability she has established and the fiscal choices made in the autumn.
However, the Institute for Fiscal Studies (IFS) cautions that difficult choices are unavoidable, with potential spending cuts for some departments after adjusting for rising costs.
The IFS highlights the NHS funding decision as one of the most significant aspects of the spending review.
The Department of Health and Social Care (DHSC)’s daily budget is projected to reach £202 billion in 2025-26, representing 39% of total daily departmental spending.
The IFS warns that substantial NHS funding increases would necessitate either real-terms cuts for other departments or further tax increases in the autumn budget.
The chancellor has resisted calls, including from within her own party, to relax borrowing limits or implement additional tax measures.
Reeves’s fiscal framework mandates that daily government expenses be covered by tax revenue, rather than borrowing, and aims to reduce national debt as a percentage of national income over five years.
Despite raising business taxes by increasing employer National Insurance contributions, she has adhered to Labour’s manifesto commitment against increasing income tax, national insurance, or VAT.
She will state on Wednesday: “I have made my choices. In place of chaos, I choose stability. In place of decline, I choose investment. In place of retreat, I choose national renewal. These are my choices. These are this government’s choices. These are the British people’s choices.”
She will also emphasize infrastructure spending, including £14 billion for the Sizewell C nuclear power plant and £15.6 billion for local transport projects.
“The priorities in this Spending Review are the priorities of working people,” she will tell MPs. “To invest in our country’s security, health and economy so working people all over our country are better off.”
Conservative shadow chancellor Mel Stride criticized Labour’s approach as “spending money it doesn’t have, with no credible plan to pay for it,” predicting increased borrowing, debt, and future tax increases. He concluded: “Don’t be fooled. We can’t afford Labour.”
The Liberal Democrats urged the government to prioritize economic growth to prevent public service cuts, with Treasury spokesperson Daisy Cooper expressing concern about potential shortfalls in crucial areas.
Chancellor Reeves’s announcements will significantly impact public spending in Scotland and Wales.
Sir Keir Starmer attributes recent policy decisions to an improving economy.
The spending review will substantially influence the Welsh government’s budget.
Home Secretary Yvette Cooper finalized her department’s agreement with Reeves on Monday.
Chancellor Reeves announced that all pensioners earning under £35,000 will now be eligible for a specific payment.