The Chancellor Rachel Reeves has today presented the Spending Review to Parliament, setting out the day-to-day budgets of government departments between 2026 and 2029 and investment budgets up to 2030.
The Spending Review reveals the spending priorities of the Starmer government and indicates a prioritisation of departmental funds for healthcare, defence, and energy.
The following announcements have been confirmed:
£39 billion allocated for a new Affordable Homes Programme to invest in social and affordable housing in England between 2026 and 2036 – an average of £3.9bn a year compared to £2.3bn currently.
£15.6 billion allocated for transport projects in English city regions outside of London between 2027 and 2031, including:
- £2.5bn for East-West Rail which will connect Oxford and Cambridge
- £2bn for the East Midlands to improve road, rail and bus connections between Derby and Nottingham
- £800 million for the West of England to improve rail infrastructure and develop a mass transit between Bristol, Bath, South Gloucestershire and North Somerset
- An additional £14.2 billion toward the cost of building Sizewell C nuclear power plant in Suffolk
- £2.5 billion to support Rolls Royce in the development and delivery of small modular reactors (SMRs)
- £9.4 billion for carbon capture and storage projects
- £13.2 billion for the Warm Homes plan, investing in insultation, heat pumps and solar panels
An update to the Treasury’s infamous Green Book which assess the value of proposed infrastructure projects to the taxpayer (and is widely criticised for favouring development in London and the South East)
- £1.2 billion to support young people into training and apprenticeships
- £445 million for railways in Wales – notably announced ahead of Senedd elections next year
- £118 million to keep coal tips safe in Wales
Renewing Britain?
Reeves has sought to frame the Spending Review as the end of ’14 years of mismanagement and decline’, with Labour’s spending plans argued as heralding an end to the austerity years of the previous Conservative governments.
And yet, while spending is set to increase under Labour, the meta data reveals tough choices coming down the tracks. Reeves’ claim that public spending will grow by 2.3% a year in real terms is skewed by the government’s front-loading of investment in its first two years, with further spending cuts or tax rises likely from 2026.
Likewise, the decision to increase NHS spending by 3% a year in real terms means likely reductions in the day-to-day spending of other departments, with the Home Office and Ministry for Housing, Communities and Local Government facing significant cuts.
Ultimately, then, the key variable for determining whether or not the Chancellor can walk the tightrope between maintaining her fiscal rules and injecting investment into cash-strapped public services will be the success or failure of the government’s defining mission: growth.
And in a world of increasing great power competition, trade wars, and the decoupling of national economies, the fate of economic growth might, in the end, be beyond the Chancellor’s control.
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