Cliff Notes
- Rachel Reeves announced a funding increase for key sectors: the Ministry of Defence will see a rise in spending from 2.3% to 2.6% of GDP by 2027, while the NHS receives an additional £29bn per year.
- Significant investments include £39bn for social and affordable housing over the next decade, and £15bn for transport improvements across the West Midlands and North.
- The Chancellor also plans a £7bn investment to create 14,000 new prison places, alongside an increase in funding for education and training initiatives aimed at supporting young people.
Spending review 2025: The key announcements
Rachel Reeves has set out her spending review in the House of Commons.
It outlines how much funding individual government departments will receive over the next three years and state infrastructure investment for the next four years.
The last spending review took place during the COVID-19 pandemic, and before that, in 2015.
Here’s what’s been announced:
Defence
A major recipient of funds is the Ministry of Defence. Defence spending will rise from 2.3% of gross domestic product (GDP) to 2.6% by 2027. An £11bn uplift and a £600m uplift for security and intelligence agencies.
Within that there’ll be £4.5bn of investment in munitions made in Glasgow and more than £6bn to upgrade to nuclear submarine production.
NHS
The chancellor announced an extra £29bn a year will be spent on the NHS, an annual rise of 3% on current levels.
She says she is increasing the NHS technology budget by almost 50%, and £10bn to bring the “analogue health system into the digital age”.
Asylum and border security
The chancellor says border security funding will increase, with up to £280m more per year by the end of the spending review for the new Border Security Command.
She said the Home Secretary Yvette Cooper will end the costly use of hotels to house asylum seekers by 2029.
The chancellor says funding she has announced today, including from the transformation fund, will also cut the asylum backlog, see more appeal cases heard and “return people who have no right to be here”.
This will save the taxpayer £1bn a year, she says.
Energy
The biggest nuclear building programme for half a century has been announced with £14.2bn being poured into the Sizewell C nuclear power station – which was announced earlier this week – on the Suffolk coastline.
A total of £14bn will go to the Sizewell C nuclear power plant. Another £2.5bn will be invested in a new small modular reactor programme.
A commitment to nuclear was reiterated, with £30bn allocated.
Science and technology
The chancellor says she wants the country’s high-tech industries in Britain to continue to lead the world in the years to come.
Research and development funding will go to a record high of £22bn a year by the end of the spending period.
Artificial Intelligence
The chancellor has backed “home-grown AI” with a £2bn investment.
She says the technology has the potential to “solve diverse and daunting challenges” and create “good jobs”.
Housing
Government funding of social and affordable housing has been allocated £39bn, over the next 10 years – which Ms Reeves called the “biggest cash injection into social housing in 50 years”.
She says she is providing an additional £10bn for financial investments, including to be delivered through Homes England, to help unlock hundreds of thousands more homes.
Transport
The chancellor announced £15bn for new rail, tram and bus networks across the West Midlands and the North. She’s also green-lit a new rail line between Liverpool and Manchester.
She says investments in buses, train stations, metro lines and transit will be made in places including Rochdale, Merseyside, Birmingham and West Yorkshire.
In London, Ms Reeves says there will be a “four-year settlement” for the Transport for London and a “fourfold increase” in local transport grants by the end of this parliament.
As expected, the £3 bus cap has been extended to March 2027. It had been £2 up to the end of 2024.
Nations
On the nations of the UK, the chancellor announced:
• Scotland has been allocated £52bn
• Northern Ireland has been allocated £20bn
• Wales has been allocated £23bn.
Justice
To fund 14,000 new prison places, £7bn will be invested, with £700m a year going to reform the probation system.
In order to reach the goal of 13,000 more police officers in England and Wales, £2bn will be allocated.
Education and training
The chancellor confirms that free school meals will be extended to over half a million more children. She says the policy alone will lift 100,000 children out of poverty.
Nearly £2.3bn a year will go to fix crumbling classrooms. A further £2.4bn will go to rebuild 500 schools.
Another record investment amount was announced by Ms Reeves for training and upskilling – £1.2bn a year by the end of the spending review will go to support more than a million young people into training and apprenticeships.
School-based nurseries have been given £370m. The core schools budget is rising by £3.5bn a year.
Additional reading
Spending review 2025 – Reeves criticised for ‘fantasy’ plan as economists warn tax hikes ‘very likely’ – The Independent
Rachel Reeves seized her moment – whatever the future brings, Labour’s economic course is now set – The Guardian
Labour has made its big play. Are you not convinced? – The FT
