Reaction to the 2025 Spending Review
Chancellor of the Exchequer Rachel Reeves has delivered a spending review, releasing a large amount of money for capital investment while also committing to further spending cuts in order to meet the UK’s self-imposed fiscal rules. This wasn’t ever going to be something that challenged the UK’s failed systems of inequality, but there are points of hope – and the seemingly last-minute changes brought big shifts in spending and messaging that show just how much pressure is being brought onto the government.
First off, lets take a step back. This is a spending review being done in a crisis. Regardless of the reporting about “winners and losers” from the review, we need to put all this in the context of the years of austerity hollowing out public services; the way that privatisations since the 1980s shifted massive amounts of public wealth and democratic control to the private sector; and the way that wealth, income, and power has become incredibly concentrated in the hands of the richest. There is, by almost any count, more wealth in the UK than there’s ever been. We just can’t put it to any good use.
The question for every budget and spending review should be whether the government challenges these systems. Disappointingly, they didn’t.
Capital Spending
On capital spending (one-off spending, effectively, that buys or creates an asset) the government decided to change how they calculate debt in their fiscal rules, creating financial space for a big overall increase. This has led to a lot of big numbers flying around the press: £39bn for housing, £15bn for transport, nuclear projects. A while there is a lot to cautiously welcome – and some, like the extension of free school meals , to celebrate – the numbers conceal a lot of tensions about the government’s project.
Take transport. Helping places outside London build or extend public transport is crucial to helping rebalance regional inequalities while also helping strengthen communities. Cities looking at taking back some control over their bus systems after years of privatisation eroded services will benefit. But a lot of the projects announced are actually re-announced projects from the last Conservative government and some areas, particularly Wales, Devon, and Cornwall, seem to have been allocated very little.
Similarly, the £39bn for housing sounds good but it already being fiercely contested. According to the Resolution Foundation, across the 10-year period, the spending on affordable housing will be the largest since 2008/9, which is good – but there was still, very notably, a housing crisis going on in 2009. It’s also not being spent equally each year. There won’t be a real rise in spending for the first three years, with most of the money earmarked for after 2030, which gives plenty of time to decide to cut back or for a new government to cancel it after the election.
The way that money is used will also need to be watched closely. This is the UK, we can’t just spend the money directly on building social homes; that would be far too simple. Instead, the money will be allocated to developers, housing associations and local authorities in grants. Local authorities may choose to use some of this money for social homes, but a lot of this money will end up as profits and shareholder payouts for the big developers. Part of the settlement the government reached also allows social housing providers to increase social rents above inflation, putting pressure on people struggling the most. This housing funding is a long-way off transformational. It really shows the extent to which our system is broken; you can pour £39bn into it and watch it leak out without ever getting close to the number of homes built through social housing programmes in the 1950s, 60s, and 70s.
The other big announcement of £14.2bn for nuclear again conceals some cuts. Great British Energy, the publicly-owned renewable energy company that replaced Labour’s green new deal plans, is being forced to fund large chunks of this instead of renewables, taking 30% of their £8.3bn budget. Nuclear’s part of a green energy mix, but this still amounts to a big cut to renewables funding as well as making it more difficult for Great British Energy to become an actual publicly-owned energy company instead of just a funding distributor.
Day-to-Day Spending
And that’s the good news! On day-to-day spending, the picture is bleaker. Health spending gets a big increase, which is deeply needed, but outside that departments are getting their worst day-to-day spending outcomes since 2015 – meaning real-terms cuts. Education spending, for example, is still lower than 2009/10 levels per student while social care and social security will continue to struggle on the brink of collapse.
Is this austerity? In many ways, austerity was never about the numbers; the Conservative-led governments spent hundreds of billions on tax cuts. It was about the impact it had on people and communities. Changing the sums on government accounting books allows politicians to argue that they’ve ended austerity and point to the size of the fiscal expansion, but until we are investing in people and planet, the spirit of austerity is alive and well. Already, the government has gotten right back to planning big welfare cuts for people with disabilities and long-term illnesses. The policies needed to reduce child-poverty, like scrapping the two-child cap, remain unimplemented.
It’s good that the government have felt the public pressure to say they’re changing the UK’s course, but this review seems unlikely to actually start changing the UK’s course – and as we’ve seen, this gap between rhetoric and reality is how you erode public trust and encourage support for the far right.
The Change We Need
This continued starvation of public good isn’t necessary. There’s an enormous amount of money in the UK; by any metric we’re richer than we were when we built the welfare state. But that wealth is concentrated in the hands of the super rich. We need policies that start taxing the rich fairly and building public wealth.
We know that there’s £619.5bn of billionaire wealth in the UK and that 70% of the land owned by <1% of the population. This inequality is hurting all of us, from worse health and education to damaging our environment. But it’s not inevitable. As our co-founders Profs. Kate Pickett and Richard Wilkinson have shown, we’d all do better in a more equal society.
Nationally, we could implement wealth taxes, invest in people and planet, nationalise failing privatised infrastructure and start building stronger communities; we could hand power to our communities to help them change the inequalities they face. Not implementing these things in this review was a political choice, but it’s a choice the government could change at any time.
Other reactions
- Tax Justice UK welcome the investments, but worry about the coming cuts to social security. Instead, they say, the government should tax the rich.
- Tax specialist Richard Murphy points out the increase in spending is much, much smaller than claimed while warning of spending cuts.
- TaxWatch warn that starving HMRC of funding will make it impossible to stop tax avoidance.
- Women’s Budget Group argue that care infrastructure is as vital as physical infrastructure, but show the investment there is missing.
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