Spending Review: What is it and what might Chancellor Rachel Reeves announce?
Spending Review 2025: Key points at a glance
(about 3 hours later)
Chancellor Rachel Reeves
Chancellor Rachel Reeves has given details of the UK's first multi-year spending review since 2021.
Chancellor Rachel Reeves faces difficult choices in this week's Spending Review, which sets the budgets for all government departments over the next few years.
The review sets the day-to-day budgets of government departments over the next three years, used to pay staff and deliver public services.
The review will confirm how much taxpayers' money will be spent on the NHS and other public services used by millions.
It also sets their investment budgets until the end of the decade, to pay for new infrastructure such as hospitals, schools, and military kit.
It will also set out how much money the government plans to invest in projects like new public transport schemes.
The Spending Review will be delivered by Reeves on Wednesday, 11 June. She will make the announcement at around 12:30 BST, after Prime Minister's Questions.
Health
In October she set department budgets for 2025-26, and will now confirm how much they have to spend over the following three to four years.
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
Reeves has already set out what how much total government spending will rise by over the period.
Education
On Wednesday this will be broken down by department.
The review covers two categories of spending:
Core schools budget in England to go up by £4.5bn a year by 2029
Day-to-day spending, which includes things like salaries, supplies and other administration costs. This is known as "resource" spending
Free school meals to be extended to around 500,000 more children whose parents are receiving benefits, costing around £1bn up to 2029
Investment, which includes funding for infrastructure as well as building things like new schools, hospitals and roads. This called "capital" spending
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"
Wednesday's Spending Review will set out day-to-day expenditure for three years and investment spending for four years.
Crime, justice and borders
LIVE: Reeves to set out spending plans with more cash expected for housing and the NHS
Reeves says "spending power" of police forces will go up by an average 2.3% per year in real terms by 2029
Which departments will get a boost to spending?
Annual funding for the Border Security Command, responsible for tackling small boat crossings, to increase by up to £280m by 2029
The government has already said that day-to-day spending will rise by an average of 1.2% for each of the three years covered by the review. Investment will increase by an average of 1.3% a year for four years.
Pledge to end the use of hotels to temporarily house asylum seekers before the next election
The "relatively modest" rise could mean that "sharp trade-offs are unavoidable" when setting the budget for each department, according to the Institute for Fiscal Studies (IFS) think tank.
Defence
The government has said it wants to increase investment. Reeves has changed the way that debt is measured to free up more than £100bn to fund building, research and development as well as other major projects.
Defence spending is due to rise from 2.3% to 2.5% of overall economic output by 2027
As Wednesday approaches, here is what we know so far:
Housing and local government
Winter fuel payments will be made to three quarters of pensioners this year. Reeves confirmed a U-turn on the government's controversial decision to limit the payments to those receiving means-tested benefits. The government said the change will cost around £1.25bn in England and Wales
£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
Defence spending will rise from 2.3% of gross domestic product (GDP) to 2.5% by 2027 - an increase of around an extra £5bn a year. This will be paid by cutting the overseas aid budget. Ministers want to increase defence spending to 3% by 2034
Transport, energy and environment
There are suggestions that the NHS will get an extra £30bn over three years
£15.6bn allocated between 2027 and 2031 for transport projects in English city regions outside London
Free school meals will be expanded to 500,000 children whose parents are receiving Universal Credit, regardless of their income. Across education, day-to-day spending will rise by £4.5bn a year by 2028-29, according to The Observer
Additional £11.5bn committed towards the cost of building the Sizewell C nuclear power plant in Suffolk, which will also require private investment
The government will invest £14.2bn in building the Sizewell C nuclear power station in Suffolk. It will also spend £2.5bn to build the UK's first Small Modular Reactors
£3 cap on single bus fares in England extended until March 2027
Investment worth £15.6bn will fund extensions to trams, trains and buses in Greater Manchester, the Midlands and Tyne-and-Wear, after criticism that too much infrastructure spending targeted London and the South East
Rules used by Treasury officials to assess proposed infrastructure projects to be updated
The government will spend £86bn on the science and technology sector by the end of the parliament, including funding research into areas such as drug treatments and longer-lasting batteries
How is the UK economy doing and how much room for manoeuvre does Reeves have?
Government borrowing - the difference between how much it spends and how much it raises from taxes - grew to £20.2bn in April.
That was £1bn higher than the same month in 2024, and more than some economists expected.
Although tax revenue increased in April, notably as a result of the increase in the amount of National Insurance Contributions (NICs) paid by employers, so did spending.
This was largely because of increases in pensions and other benefits, pay rises and higher borrowing costs.
Meanwhile, the financial buffer that allows Reeves to meet the government's two self-imposed fiscal rules is very slim.
The rules are that:
Day-to-day government spending should be paid for with tax revenue, not borrowing
The amount of government debt should fall as a share of national income by the end of the current parliament in 2029-30
The government is currently forecast to have a budget surplus of £9.9bn at that point, which is the third-smallest on record.
This surplus is often referred to as "headroom" and theoretically acts as buffer against an economic shock or an increase in spending.
But because the projected surplus is so small, it is very vulnerable.
Between the Autumn Budget and Spring Statement in March, it was wiped out mostly because of higher debt interest payments as well as sluggish economic growth.
As a result, Reeves announced a £14bn package of savings in March, including £4.8bn of welfare cuts.
The latest official data suggests that the UK economy could be strengthening. It grew by 0.7% between January and March, which was better than expected.
However, it is not clear whether that growth will continue, especially as US President Donald Trump's US tariffs hit the UK and wider global economy.
