Spending Review – 11 June 2025
The Labour government’s first Spending Review was delivered against a political and economic backdrop that looked very different to the one following last July’s election.
After considerable trailing, the Spending Review proved to be much as expected, with the NHS and Defence to the fore and the Home Office and FCDO to the rear. There are still important documents relating to the Spending Review to appear, notably the much-deferred Industrial Strategy and the ten-year infrastructure plan.
Once the missing documents are published – probably later this month – the Chancellor’s focus will turn to her autumn Budget, the date of which was not announced alongside the Spending Review. Having spelled out a raft of spending and investment commitments, she will be hoping that the OBR does not force her to raise taxes and/or borrow more as a result of the revisions it will inevitably make in the autumn 2025 ‘Economic and Fiscal Outlook’.
Highlights
- No tax announcements, which will have to await the Autumn Budget.
- Capital spending to increase by £113 billion through to 2029/30.
- Overall day-to-day spending to rise by 1.2% a year in real terms over next three years.
- The NHS is a major winner, with a real day-to-day spending rise of 3%.
- Overall investment spending on defence up by 7.3% a year in real terms.
- By April 2027, defence spending (including intelligence) will stand at 2.6% of GDP.
- Long term investment funding commitments across transport infrastructure, social housing and prison places.
- The Home Office and Foreign, Commonwealth and Development Office are the major losers.
