Chancellor Rachel Reeves has unveiled the UK’s first multi-year spending review since 2021, outlining the government’s financial plans for the coming years. This comprehensive review sets day-to-day budgets for government departments over the next three years and investment budgets until the end of the decade, impacting public services, infrastructure, and various sectors across the nation.
Key Takeaways from the Spending Review 2025
- The Spending Review 2025 outlines the UK government’s financial strategy for the next three years for day-to-day departmental budgets and until the end of the decade for investment.
- Significant allocations are made across health, education, justice, defence, housing, transport, and international affairs.
- The review aims to balance increased spending in key areas with productivity improvements and savings.
Health Sector Boost
The National Health Service (NHS) in England is set to receive a substantial increase in its day-to-day budget. This will see a 3% real-terms rise on average over the next three years, reaching £226 billion by 2029. Alongside this, a pledge has been made to deliver £17 billion in health service savings over three years, primarily by boosting productivity by 2%.
Education Funding and Support
Education also sees notable changes. The core schools budget in England will increase by 0.4% in real terms on average over the next three years, reaching £69.5 billion by 2029. A significant expansion of free school meals is planned, extending to approximately 500,000 more children whose parents receive benefits, at a cost of around £1 billion up to 2029. Additionally, an extra £615 million this year will partially fund a 4% pay rise for teachers in England, with schools expected to cover a quarter of this through "improved productivity."
Crime, Justice, and Borders
In the realm of crime, justice, and borders, the Home Office day-to-day budget will decrease by 1.7% in real terms over the next three years. However, the "spending power" of police forces is projected to increase by an average of 2.3% per year in real terms by 2029, assuming local tax increases. Annual funding for the Border Security Command will rise by up to £280 million by 2029 to tackle small boat crossings, with a commitment to end the use of hotels for asylum seekers before the next election. The Ministry of Justice budget will see average real-terms rises in day-to-day spending of 1.8% a year, and £7 billion is allocated until 2029 to build 14,000 new prison places in England and Wales by 2031.
Defence and International Affairs
The Ministry of Defence’s day-to-day budget will increase by 0.7% in real terms, with investment spending averaging 7.3% over the period. Defence spending is set to rise from 2.3% to 2.5% of overall economic output by 2027. Conversely, the Foreign Office day-to-day budget will decrease by 6.8% in real terms over the next three years, largely due to reduced aid spending, with overseas aid making up 0.3% of national income by 2027.
Housing, Transport, and Energy Initiatives
For housing and local government, £39 billion is allocated for social housing in England between 2026 and 2036, averaging £3.9 billion a year. Transport projects in English city regions outside London will receive £15.6 billion between 2027 and 2031. An additional £11.5 billion is committed towards the Sizewell C nuclear power plant in Suffolk, which will also require private investment. The £3 cap on single bus fares in England is extended until March 2027, and rules for assessing infrastructure projects will be updated.
