What was in Rachel Reeves’ historic spending review – and what was missing?

Social housing, mini nuclear reactors and local buses are the big winners from Rachel Reeves’ spending review, as the chancellor set out how the Labour government will spend its pocket money.

Labour say their agenda is to rebuild schools and hospitals, provide opportunity for all, and to undo the damage from 14 years of Conservative rule. Today’s (11 June) spending review is a big declaration of how they plan to do that, with Reeves saying its purpose was “to ensure that renewal is felt in people’s everyday lives, in their jobs, and on their high streets”.

In a speech to parliament, Reeves set out spending plans for government departments, and gave an idea of what the government is actually going to prioritise. Unlike a budget, there were no decisions on tax.

Spending on infrastructure – things like roads, bridges and reservoirs – has fallen behind in the UK, with EY identifying £1.6 trillion of projects in the UK which are currently unfunded, potentially leaving critical projects, including energy plans, at risk.

What’s been announced in the spending review?

Overall, the spending review represents a £113 billion plan for infrastructure over the parliament, with a focus on towns and cities outside London and the south east. An infrastructure strategy, set to be published next week, will also provide further details. There will be a total real-terms increase of 2.3% a year in departmental budgets.

But the question is where this money goes. 

Social housing

The most high-profile measure is £39bn in spending for affordable homes over the 10 years to 2036. The National Housing Federation branded it “the most ambitious affordable homes programme in decades”.

The government has set itself a target of building 1.5 million new homes, and this funding represents an increase on Tory affordable home spending from £2.36bn a year to £3.9bn a year. 

Additional £10bn for financial investments, “to crowd in private investment and unlock hundreds of thousands of new homes”.

Homelessness

Although not mentioned in Reeves’ speech, the government is putting extra funding towards fighting homelessness. Councils will be given £950m to buy temporary accommodation, and £100m is being spent on early interventions to prevent homelessness.

Asylum hotels

Reeves announced Labour will end the use of asylum hotels by 2029, putting a firm date on a manifesto commitment. It came with extra funding to cut the asylum backlog, hear more appeal cases and do more returns

Labour has struggled to reduce the amount of the foreign aid budget spent on hotels, managing only to cut it from £2.3bn to £2.2bn in its first year of power. The hotels are run by private firms, often making huge profits, and currently cost a total of £3.1bn a year. Reeves says ending the use of hotels will save £1bn a year, and also announced £280m extra per year for the new Border Security Command, nearly tripling the existing £150m funding. 

Prisons and justice

Labour will invest £7bn in 14,000 new prison places – plans which include three new prisons – and £700m a year into reform of the probation system.

But in May, justice secretary Shabana Mahmood admitted these plans will still leave the UK 9,500 prison places short by 2028.

The government is also increasing police spending power by 2.3% per year in real terms.

Transport

Public transport for those living outside the UK’s cities has worsened in recent years, with almost a fifth of rural bus routes vanishing in the past five years.

Reeves said the government’s plans are “working to undo a generation of underfunding and neglect”.

The headline transport announcement in the spending review was £15.6bn in extra funding for city region transport. A four-year settlement of £2.2bn for Transport for London will provide “certainty and stability”.

£2.3bn has been set aside for local transport improvements such as bus lanes, and Reeves has extended the £3 bus cap until March 2027.

Inter-city rail projects have been funded, including £2.5bn for the East-West Rail project connecting Oxford and Cambridge, and £3.5bn for the Transpennine route upgrade which will speed up journeys between Manchester and Leeds.

Nuclear energy

The government is putting its faith in nuclear energy. Reeves confirmed £14.2bn for a new nuclear power plant at Sizewell C, which the chancellor said will produce the energy to power 6 million homes. Alongside this, there will be a £2.5bn investment in a small modular reactor programme. Likely to be a partnership with Rolls Royce, it is “just one step towards our ambition for a full fleet of small modular reactors,” said Reeves.

Children and schools

There will be a £4.5bn uplift in the core schools budget.

Reeves announced £2.3bn a year to fix “crumbling classrooms”, along with £2.4bn a year “to continue our programme to rebuild 500 schools”. Alongside this, there will be £370m invested in school-based nurseries, and  £555m of transformation funding, so that children “do not go needlessly into care when they could stay at home”, and for better provision for those who do need to go into care.

The NHS

The NHS has been given a 2.8% real-terms increase in spending until 2028.

A “record cash investment” in real-terms day-to-day spending will see a 3% per year increase. Reeves says this will amount to an extra £29bn a year. There will also be a £2.3bn real-terms increase in capital spending, which will allow the NHS to invest in new hospitals and technology.

Reeves also announced £10bn to “bring our analogue health system into the digital age”.

What wasn’t in the spending review?

During nearly an hour in the Commons chamber, Reeves got to set out money the government was spending. But what was missing from her speech gives hints as to the government’s priorities.

The increase in school budget “leaves less flexibility for schools than they might have hoped”, said Natalie Perera, chief executive of the Education Police Institute. “The most pressing challenge is the crisis in special educational needs and disabilities (SEND) provision and today’s settlement doesn’t appear to leave adequate funding to deliver the much-needed reforms in this area. Reforming SEND provision will require investing in highly trained support staff, adapted learning environments, and consistent, high-quality training for teachers across all schools.”

Social care received little attention, leading to doubts over the government’s commitment. “The lack of funding announced in the spending review gives little confidence that there will be the ambitious change people drawing on social care deserve,” said Kate Terroni, CEO of United Response. “”Underfunding leaves those who need support most at risk of facing fewer choices, more disruption, and less stability. We understand the conflicting cost pressures facing the government but meaningful investment in community services is vital to supporting people to lead full lives.”

John Bird, founder of Big Issue and a crossbench peer in the House of Lords, said the government should introduce legally-binding poverty reduction targets to ensure it meets its promise of reducing poverty. “The spending review does its best to manage the crisis that surrounds poverty. Unfortunately, it has within it all the mechanisms for managing poverty and not ridding us of its presence amongst us,” said Bird.

“I would have been more impressed if the chancellor had said that the government would set aside a small amount of money to investigate the possibility of creating a Ministry of Poverty Prevention and Cure, to declare war on poverty. Because it’s expensive keeping people poor. The vast NHS bill is exaggerated by the large amount of patients suffering from food poverty. Poverty destroys government budgets, undermining their effectiveness.”

An investment in housing and homelessness was welcomed – but Mairi MacRae, director of campaigns and policy at Shelter, said firm targets on social rent homes were needed. “For too long, past governments allowed thousands of social homes to be lost each year, while funnelling public money into so-called ‘affordable homes’ which are priced far out of reach for many. The result has been record homelessness, and families, young people, and key workers priced out of their communities,” said MacRae. “To ensure this funding tackles homelessness at its root, the government must now set a target for how many social rent homes it will deliver through this programme.”

Spending on infrastructure and the NHS was promising, said Harry Quilter-Pinner, executive director of the IPPR, a think tank influential with Keir Starmer’s government, but “in other areas we have yet to hear how the government will solve the big challenges facing the country: social care, universities and local authorities all face tough years ahead after years of under-investment and cuts, for example.”

He added: “If the government wants to tackle these challenges, as voters expect it to, it will have to look again at taxes over the coming years.”

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