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Rachel Reeves set out her spending plans for the coming years this afternoon in a Spending Review that many fears will lead to fresh tax rises.
Major boosts for the NHS, schools, defence, local transport and nuclear power were unveiled by the Chancellor when she sets out departmental settlements for the next few years
But it also involved squeezes for other departments as the Chancellor seeks to keep within the fiscal rules she has set for herself.
Her room for manoeuvre has also been further constrained by the Government’s U-turn on winter fuel payments, which will see the benefit paid to pensioners receiving up to £35,000 per year at a cost of around £1.25 billion to the Treasury.
Among the expected losers are the police, with Yvette Cooper‘s pleas for more cash to help with lowering crime believed to have fallen on deaf ears, despite warning it could lead to fewer bobbies on the beat.
Chancellor Rachel Reeves is prepared to announce real-terms increases for the service every year, but there are fears that it may not be enough.
However the Home Secretary will get more than half-a-billion pounds to plough into strengthening the UK’s borders – including drones to spot migrants in the Channel.
Ms Reeves also vowed to end the use of hotels to house Channel migrants before 2029.
Major boosts for the NHS, schools, defence, local transport and nuclear power are expected to be unveiled by the Chancellor at lunchtime when she sets out departmental settlements for the next few years
Among the expected losers are the police, with Yvette Cooper’s pleas for more cash to help with lowering crime believed to have fallen on deaf ears.
WINNERS
The NHS
Among the main announcements was a £29 billion increase in NHS funding, a rise of around 3 per cent in real terms.
Ms Reeves defended the Government’s record on the NHS since coming into office, including 1,700 new GPs, 3.5 million more appointments and cutting waiting lists by 200,000.
She said the Government was spending £10 billion on more digitising services as part of the Government’s 10-year plan for the health service.
She said: ‘To support that plan, to back the doctors and nurses we rely on, and to make sure the NHS is there whenever we need it, I am proud to announce today that this Labour Government is making a record cash investment in our NHS, increasing real-terms, day-to-day spending by 3 per cent per year for every year of this spending review.
‘An extra £29 billion per year for the day-to-day running of the health service. That is what the British people voted for and that is what we will deliver. More appointments. More doctors. More scanners. The National Health Service, created by a Labour government, protected, by a Labour government, and renewed, by this Labour Government.’
But the Institute for Fiscal Studies has already warned that any increase in NHS funding above 2.5 per cent is likely to mean real-terms cuts for other departments, or further tax rises to come in the budget this autumn.
The Institute for Fiscal Studies has already warned that any increase in NHS funding above 2.5 per cent is likely to mean real-terms cuts for other departments, or further tax rises to come in the budget this autumn.
The cash injection, which amounts to £17 billion in real terms, comes after Sir Keir Starmer pledged to ensure that by the next election 92 per cent of patients in England waiting for planned treatment are seen within 18 weeks of being referred.
Latest NHS data suggests around 60 per cent of people are currently seen in this time and figures released last month showed the overall number of patients on waiting lists had risen slightly from 6.24 million to 6.25 million.
But it comes just nine months after The NHS was a major winner from Ms Reeves’s first Budget last October, when the Chancellor as she poured £22.6billion more into the flatlining health service.
At the time Health Secretary Wes Streeting was brutally clear that this may not be enough, because the NHS is ‘not just on its knees, it’s on its face’.
Schools
Ms announced £4.5 billion-a-year for the core schools budget by the end of the spending review.
The Chancellor also said there would be investment rising to nearly £2.3 billion per year to ‘fix our crumbling classrooms’.
Some £370 million will be spent on school-based nurseries, in addition to £555 million to ‘break the dangerous cycle of late intervention and low-quality care’.
She told MPs: “People who went to ordinary comprehensives like mine in the 80s and 90s are all too familiar with the experience of being taught in temporary classrooms.
‘And the previous Conservative government oversaw another generation of kids herded into cold, damp buildings as school roofs literally crumbled. It wasn’t acceptable when I was at school, and it isn’t acceptable now.’
A report earlier this year warned schools and universities are facing squeezed budgets next year as rising costs are likely to outstrip funding growth.
Education is set to be one of the big winners today. Pictured is Education Secretary Bridget Phillipson
The Institute for Fiscal Studies (IFS) said state school budgets will remain ‘very tight’ and universities will not reach a ‘secure financial footing’ in 2025/26.
This is despite Labour’s new VAT on private school fees, which will pay for 6,500 new teachers, and a university tuition fee rise of £285 to £9,535.
Earlier this week the National Education Union called for a 2 per cent wealth tax to be used to pour more money into education.
General secretary Daniel Kebede said: ‘Our schools are at breaking point, with cuts leading to fewer resources, larger class sizes, and the erosion of subjects that are crucial to a well-rounded education. The Government must stop short-changing education.
‘Now is the time for a wealth tax, and closing unfair loopholes to ensure the very richest pay their fair share. Instead of picking the pockets of our pupils, it’s time to tax profits and prioritise our children and our communities over corporate greed.’
Defence
Defence spending will rise to 2.6 per cent by April 2027, Rachel Reeves confirmed, as she said Britain will become a ‘defence industrial superpower’.
The cash will include £11billion for rebuilding the Armed Forces in the face of an increased threat from Vladimir Putin’s Russia.
It comes days after the NATO secretary general warned that Britain’s only alternative to investing more in the military would be to start learning Russia.
Former Dutch PM Mark Rutte issued the chilling message while in London for talks with Sir Keir ahead of a NATO summit later this month.
The Chancellor quoted Sir Keir Starmer who said the global security situation meant a ‘new era for defence and security’ was needed. Increased spending would lead to jobs across the UK, she added.
She said: ‘A new era in the threats we face demands a new era for defence and security. That’s why we took the decision to prioritise our defence spending by reducing Overseas Development Aid so that defence spending will now rise to 2.6% of GDP by April 2027 including the contribution of our intelligence agencies.
‘That uplift provides funding for the Defence Secretary, with a £11bn increase in defence spending and a £600m uplift for our security and intelligence agencies.’
Ms Reeves said £4.5 billion would be invested in munitions in Glasgow, Glascoed, Stevenage and Radway Green. £6 billion will be spent on upgrading nuclear submarine production in Barrow, Debry and Sheffield.
NATO allies are expected to be asked at the gathering to agree a commitment on allocating 3.5 per cent of GDP to core defence spending by the 2030s.
Defence spending is expected to be increased as the government reacts to the growing military threat from Vladimir Putin’s Russia. Defence Secretary John Healey pictured arriving at Cabinet today.
It comes days after NATO secretary general Mark Rutte warned that Britain’s only alternative to investing more in the military would be to start learning Russia.
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A further 1.5 per cent of GDP would be required for ‘defence-related expenditure’ under Mr Rutte’s plan to strengthen the alliance.
It follows pressure from US President Donald Trump on European members of NATO to hike their military budgets.
There are questions about how the UK would fund such an huge increase – roughly equivalent to an extra £30billion annually.
Britain allocated 2.33 per cent of GDP to defence last year, and Sir Keir has only committed to reaching 2.5 per cent by April 2027.
The Labour Government has an ‘ambition’ of increasing that to 3 per cent in the next parliament – likely to run to 2034.
Social housing
The Government’s £39 billion spending on affordable and social homes has been confirmed by the Chancellor, as she said she wanted to ensure people had the ‘security of a proper home’.
Ms Reeves told MPs Labour’s planning reforms had increased opportunities to build homes. She said it was the biggest increase in half a century.
She said: ‘A plan to match the scale of the housing crisis must include social housing neglected for too many decades, but not by this Labour Government.’
She continued: ‘Led by (Angela Rayner), we are taking action. I am proud to announce the biggest cash injection into social and affordable housing in 50 years. A new Affordable Homes Programme – in which I am investing £39 billion over the next decade.
‘Direct Government funding that will support housebuilding especially for social rent and I am pleased to report that towns and cities including Blackpool, Preston, Sheffield and Swindon already have plans to bring forward bids to build new houses.’
Angela Rayner is leading efforts to build 1.5 million new homes by the next election.
The Treasury said this would see annual investment in affordable housing rise to £4 billion by 2029/30, almost double the average of £2.3 billion between 2021 and 2026.
The additional spending has been welcomed by homelessness charities, with Crisis calling it ‘a determined political signal that housing really matters’ and Shelter describing the move as ‘a watershed moment in tackling the housing emergency’.
Flagship planning reforms which are ‘critical’ to the homes pledge cleared the Commons last night.
MPs voted by 306 to 174, majority 132, to approve the Planning and Infrastructure Bill at third reading on Tuesday evening.
Housing minister Matthew Pennycook said the Bill, which aims to improve certainty and decision-making in the planning system, will help to tackle the UK’s housing crisis.
But Tory shadow housing secretary Kevin Hollinrake described the draft legislation as ‘dangerous’ and warned it could lead to ‘rows of uninspiring concrete boxes’.
In addition, the 200-year-old law criminalising rough sleepers is to be scrapped in what homeless charities have hailed a ‘landmark moment’.
The Vagrancy Act, introduced in 1824 for punishment of ‘idle and disorderly persons, and rogues and vagabonds, in England’, is to be repealed by spring next year, the Government has confirmed.
Nuclear power
Britain’s spending on small modular nuclear reactors will ensure the UK is at the ‘forefront of a global race for new nuclear technologies’, Rachel Reeves said.
The Chancellor has also already announced some £16.7 billion for nuclear power projects, the bulk of which will fund the new Sizwwell C plant in Suffolk.
She said the preferred partner for the £2.5 billion project is Rolls-Royce. The same amount will be spent on nuclear fusion.
‘This investment is just one step towards our ambition for a full fleet of small modular reactors as well as providing a route for private sector-led advanced modular reactor projects to be deployed in the UK,’ the Chancellor told MPs.
The Chancellor has also already announced some £16.7 billion for nuclear power projects, the bulk of which will fund the new Sizwwell C plant in Suffolk.
She added it would ‘strengthen Britain’s position at the forefront of a global race for new nuclear technologies’.
The Chancellor said the Government would also support the Acorn project for carbon capture in Scotland.
She said: ‘These are investments to make sure the towns and cities which powered our last industrial revolution will play their part in our next industrial revolution, to reduce our reliance on overseas oil and gas and protect working families from price shocks.’
LOSERS
The police?
Home Secretary Yvette Cooper was the last minister to reach a deal with the Treasury, amid a major row over how much money she would get for policing.
And questions remain over whether the funding unveiled by Ms Reeves will be enough as she said shew was increasing police spending power by an average of 2.3 per cent per year in real terms – more than £2 billion.
She said forces will get more cash to allow Labour to fulfil its manifesto pledge of introducing 13,000 extra police officers in England and Wales, citing the importance of people feeling safe in their communities.
On Monday, West Midlands Police and Crime Commissioner (PCC) Simon Foster called for the reinstatement of 700 officers the force has seen cut since 2010, while Hertfordshire’s PCC Jonathan Ash-Edwards warned the force is facing a growing burden.
Their comments followed warnings by the president of the Police Superintendents’ Association Nick Smart, and Tiff Lynch, acting national chairman for the Police Federation of England and Wales.
Home Secretary Yvette Cooper was the last minister to reach a deal with the Treasury, amid a major row over how much money she would get for policing.
In December, the National Police Chiefs Council (NPCC) warned that forces in England and Wales were facing a £1.3 billion shortfall over the next two years.
And last month, head of the Metropolitan Police Sir Mark Rowley joined with head of the NPCC Gavin Stephens and four other chief constables to call for more investment.
The Home Office will also receive a £680 million cash boost for border security.
Ms Cooper has gained £100 million to spend on tackling illegal migration this year and a further £580 million over the next three years for border police and surveillance, including more drones.
The Government has vowed to crack down on people-smuggling and Channel crossings since coming to power in July last year.
This includes by funding elite officers to increase patrols along the northern French coastline and launching a specialist intelligence unit in Dunkirk to track down people smugglers.
It has also established a Border Security Command to lead strategy and its Border Security, Asylum and Immigration Bill, currently going through Parliament, seeks to introduce new criminal offences and hand counter terror-style powers to law enforcement agencies to target smuggling gangs.
