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Five takeaways from Rachel Reeves' Spending Review
The winners and losers as the government sets its budgets for the next four years
There are questions over how long the investments will take to yield results, with many departments facing real-terms cuts or freezes in the short term
(Image credit: Illustration by Stephen Kelly / Getty Images)
Rachel Reeves has announced the government's departmental budgets in her Spending Review, with housing, health and defence the big winners, while the Home Office loses out.
The Chancellor said that the review was part of the government's mission for "Britain's renewal", particularly highlighting an increase in capital investment on infrastructure projects. But with all budgets, there are winners and losers, and a number of areas in public spending could begin to feel the pinch very quickly.
Here are five key takeaways from the government's Spending Review.
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Huge investment in infrastructure, nuclear power and housing
The government is eager to shout about its investment in transport infrastructure and nuclear projects in this review. Reeves has committed £113 billion in extra capital spending, including £15 billion on transport outside London and £14.2 billion on the Sizewell C nuclear power plant, part of an £86 billion fund to "boost science and technology".
While "there was a big emphasis on energy investment", it may be that we "have to wait for the infrastructure strategy published next week for the details", said the BBC's business editor Simon Jack.
Deputy Prime Minister and Housing, Communities and Local Government Secretary Angela Rayner has also secured a bump in funding for social housing, having reportedly remained in negotiations with Reeves until last Sunday. Social housing will receive £39 billion over the next 10 years, taking the annual spend from £2.3 billion a year to £4 billion a year by 2030.
Education has also been an unexpected beneficiary in the Spending Review, receiving an uplift of £4.5 billion a year, while the government will also boost the Justice Department by £4.7 billion to build three new prisons.
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Frustration at the Home Office
Home Secretary Yvette Cooper is said to be on "resignation watch" after a "tense stand-off" with the chancellor over the Home Office budget, said The Telegraph.
The increase in spending elsewhere looks to be coming at the expense of the Home Office, with the final budget on the likes of the police and Border Force far below what Cooper was asking for.
The police will get a spending increase in real terms up to 2029, but the home secretary has argued this will not be enough and could see Labour fall short on its manifesto pledge to halve knife crime and recruit more police officers.
There are warnings, too, that more pressure could be piled on to local councils, many of which are already struggling to maintain adequate funding for social care and local services.
Health and defence given the biggest boost
As was widely expected, the NHS has received the biggest spending increases in the review. Wes Streeting will receive a £30 billion uplift in day-to-day spending as the government desperately tries to fulfil its pledge to cut waiting times.
However, NHS managers have said even this increase in funding will not be enough to hit government targets and represents a 3% real-terms rise, below the 4% the health secretary has requested.
There are also concerns that there is no budget to support health infrastructure, the chancellor instead is funnelling money towards transport and energy. Streeting has already said that the NHS "desperately needs new buildings and new hospitals" to properly support patients. In lieu of government funding, NHS officials "could consider" private financing to build and repair hospitals, said The i Paper.
Defence is another big winner with the government continuing to invest in the armed forces as it aims to meet a 2.5% of GDP spending target by 2027. The UK is under pressure from Nato to reach 3.5% of GDP to shore up Europe's defences in case of potential Russian aggression and waning support from the US.
The increase in the Spending Review will equate to around £5 billion per year, and could be funded by cuts to the International Aid budget.
Investment prioritised over day-to-day spending
The government's target is to increase public spending, and in the long term, that looks to be true thanks to the massive cash injection into infrastructure and energy. But there are questions over how long the investments will take to yield results, with many departments facing real-terms cuts or freezes in the short term.
Labour MPs know "how important it is they are seen to deliver and deliver quickly", said Chris Mason at the BBC. The government is banking on investment in the future paying off, but is leaving itself with "little room for manoeuvre" for further immediate, tangible changes for people.
Style over substance?
Paul Johnson, outgoing head of the Institute for Fiscal Studies, was not impressed by today's Spending Review. "Not sure I've ever listened to a chancellorial speech so hard to work out what is happening," he posted on X. In "rattling off huge number of figures" Reeves is attempting to make it "look like big increases in spending on everything". But "bear in mind current spending on average on all other than NHS not rising".
With her rhetoric Reeves also took aim at Conservative economic policy, declaring austerity a "destructive choice for the fabric of our society". The problem Reeves faces, said Michael Simmons in The Spectator, "is that austerity, at this point, is more of a vibe than a technical definition". A recent Ipsos poll showed that half the population already believes we are living through it.
Richard Windsor is a freelance writer for The Week Digital. He began his journalism career writing about politics and sport while studying at the University of Southampton. He then worked across various football publications before specialising in cycling for almost nine years, covering major races including the Tour de France and interviewing some of the sport’s top riders. He led Cycling Weekly’s digital platforms as editor for seven of those years, helping to transform the publication into the UK’s largest cycling website. He now works as a freelance writer, editor and consultant.
