CHANCELLOR RACHEL REEVES: “We’re investing in your security, health and economy so you and your family are better off” – The Spending Review 2025 sets the investment budgets until 2028-2029, to pay for new infrastructure such as hospitals, schools, and military kit
The new Labour government is focussing on Security, Safety and Health to revive the economy and create a better society.
“We’re investing in your security, health and economy so you and your family are better off,” the chancellor tweeted just after presenting the Spending Review.The review sets the day-to-day budgets of government departments over the next three years. It sets the investment budgets until 2028-2029, to pay for new infrastructure such as hospitals, schools, and military kit.
The Review delivers on the government’s Plan for Change: building strong foundations, kick-starting economic growth, cutting hospital waiting lists, giving children the best start in life, securing control of the country’s borders, putting police back on the beat, building 1.5 million new homes, and securing home-grown energy.
Over the last year, the government has taken action to fix the foundations of the economy, put the public finances on a sustainable path, and support growth. At the Budget last autumn, the government set out a clear fiscal strategy which included fundamentally reforming the fiscal framework by changing the government’s approach to spending to support transparency, certainty, and stability, and introducing new, non-negotiable fiscal rules. The government has now confirmed its plans for spending within the totals set out at the Spring Statement.
The steps the government has taken to restore stability have supported the independent Monetary Policy Committee of the Bank of England to cut interest rates four times since last July, leading to a fall in the cost of new mortgages. Real wages are rising and have risen by more since July 2024 than during the entirety of the 2010s. Millions of working people have also seen a pay rise of up to £1,400 a year following the government’s decision to increase the National Living Wage. Since the autumn, the international context has fundamentally changed. Global economic policy uncertainty has increased, and security threats have grown.
The UK economy has proven resilient, and the UK has seen the fastest growth in the G7 for the first quarter of this year. Both the Bank of England and the International Monetary Fund have upgraded their forecasts for GDP growth in 2025.
The government has acted quickly to strengthen partnerships with allies around the world through new trade deals with the United States, India, and the European Union, and will take further steps in the upcoming Trade Strategy, to be published later this year.
There is still further to go to address the long-term challenges that the country faces. By delivering necessary investment in combination with fundamental reform, and ruthlessly bearing down on waste through the first zero-based review in nearly 18 years, this SR takes the difficult but necessary decisions to ensure that funding is spent on national priorities: the country’s security, health, and economy.
DETAILS
Health: Reeves says day-to-day budget for the NHS in England to go up by 3% per year in real terms, around an additional £29bn per year
Education: Core schools budget in England to go up by £4.5bn a year by 2029. Free school meals to be extended to around 500,000 more children whose parents are receiving benefits, costing around £1bn up to 2029. Extra £615m this year to partially fund a 4% pay rise for teachers in England, with schools expected to fund a quarter of the rise through “improved productivity”
Defence: Defence spending is due to rise from 2.3% to 2.5% of overall economic output by 2027
Housing and local government: £39bn allocated for social housing in England between 2026 and 2036, an average of £3.9bn a year over the period compared to £2.3bn currently
Transport, energy and environment: £15.6bn allocated between 2027 and 2031 for transport projects in English city regions outside London. Additional £11.5bn committed towards the cost of building the Sizewell C nuclear power plant in Suffolk, which will also require private investment. £3 cap on single bus fares in England extended until March 2027.
